Federal Reserve Chair Jerome Powell and his colleagues are expected to keep interest rates unchanged Wednesday. President Trump has criticized the central bank for not lowering rates.
Kevin Dietsch/Getty Images
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Kevin Dietsch/Getty Images
The Federal Reserve is likely to hold interest rates steady later on Wednesday amid fears that President Trump’s tariffs will rekindle inflation and slow economic growth.
The decision to keep the Fed’s benchmark borrowing rate between 4.25% and 4.5% is widely expected by financial markets despite the president’s repeated demands for the Fed to lower interest rates.
Since the central bank’s last rate-setting meeting in March, Trump has imposed 10% tariffs on nearly everything the U.S. imports, along with 145% import taxes on goods from China. On average, Americans are now paying higher taxes on imported products than at any time since at least the 1930s, when a global trade war deepened the Great Depression.
“The level of the tariff increases announced so far is significantly larger than anticipated,” Fed Chair Jerome Powell told the Economic Club of Chicago last month. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
Trump pressures the Fed
Trade tensions have led to a sharp drop in consumer confidence. But they’ve yet to put much of a dent in the job market. Hiring in April was down only slightly from the month before.
Inflation was also fairly tame in the month leading up to the new tariffs. Prices in March were up 2.3% from a year ago, according to the Fed’s preferred inflation yardstick.
Trump highlighted the recent drop in gasoline prices as he called on the Fed to cut interest rates.
“Energy down, mortgage rates down, employment strong, and much more good news,” the president wrote in a social media post last week. “NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!”
