Powell: Trump’s Comments Won’t Sway Fed’s Interest Rate Decisions/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Federal Reserve Chair Jerome Powell emphasized that the Fed’s interest rate decisions remain independent and won’t be influenced by President Trump’s calls for lower rates. Despite Trump’s social media remarks urging cuts, Powell reiterated the Fed’s focus on economic data. With inflation rising to 3% in January, the likelihood of further rate cuts remains low.
Powell’s Fed Policy: Quick Look
- Fed Independence: Powell assured Congress that the Federal Reserve will base its decisions on economic conditions, not political pressure.
- Trump’s Rate Cut Push: The former president called for lower interest rates, linking them to upcoming tariffs.
- Inflation on the Rise: Consumer prices increased by 3% in January, making further rate cuts unlikely.
- Past Rate Cuts: The Fed reduced rates three times in 2024 but signaled a pause to monitor inflation.
- Future Outlook: While Fed officials previously anticipated two rate cuts in 2025, some economists now predict no cuts this year.
Powell: Trump’s Comments Won’t Sway Fed’s Interest Rate Decisions
Deep Look: Powell Dismisses Trump’s Pressure on Fed Rate Cuts
Federal Reserve Chair Jerome Powell made it clear on Wednesday that the central bank will not be swayed by President Donald Trump’s calls for lower interest rates. Speaking before the House Financial Services Committee as part of his semiannual congressional testimony, Powell reaffirmed the Fed’s commitment to making independent, data-driven decisions.
“People can be confident that we’ll continue to keep our heads down, do our work, and make our decisions based on what’s happening in the economy,” Powell stated, addressing concerns about potential political influence.
Earlier that day, Trump took to social media to advocate for lower interest rates, suggesting they would align with his proposed tariff policies. “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!” Trump posted. However, Powell and other Fed officials remain focused on economic indicators rather than political rhetoric.
Rising Inflation Weakens the Case for Rate Cuts
During a press conference last month, Powell hinted that the Fed would likely pause further rate reductions following three consecutive cuts in 2024. The central bank is waiting for more concrete signs that inflation is stabilizing around its 2% target before considering additional changes.
Recent economic data suggests that inflationary pressures are still a concern. A government report released Wednesday showed that consumer prices rose 3% in January compared to the previous year. This marks an increase from the 2.4% inflation rate recorded in September, which had been the lowest in three and a half years. The rise in inflation makes it less likely that the Fed will consider cutting rates in the near future.
The Fed’s Past Moves and Future Policy Outlook
Throughout 2024, the Federal Reserve cut its benchmark interest rate three times, bringing it down from 5.3% to approximately 4.3%. However, in January 2025, the Fed decided to maintain the current rate, signaling a more cautious approach amid ongoing inflationary trends.
The Fed’s rate decisions impact borrowing costs across the economy, influencing mortgage rates, auto loans, and credit card interest. Higher rates can slow economic activity by making borrowing more expensive, while lower rates encourage spending and investment.
In December, Fed officials projected two potential rate cuts in 2025, but recent inflation data has led some economists to predict that the central bank might remain on hold for the entire year. Additionally, the impact of Trump’s proposed tariffs on the broader economy remains uncertain, adding another layer of complexity to the Fed’s decision-making process.
While Trump continues to push for lower rates, Powell has reaffirmed that the central bank will remain focused on economic fundamentals. As inflation trends evolve and policymakers assess broader economic risks, the Fed’s commitment to maintaining stability remains unchanged.
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