Topline
The Federal Reserve indicated Wednesday it won’t bend to President Donald Trump’s aggressive push for interest rate cuts, though the central bank did reveal how the top U.S. monetary policymakers are approaching the U.S. economy as tariffs play out.
Federal Reserve Chair Jerome Powell will take center stage again this week.
In his latest attack on the Fed and its top-ranking official Jerome Powell, Trump derided Powell as a “stupid person” because he “probably won’t cut today.”
The Federal Open Market Committee, the 12-person panel that most crucially sets the target federal funds rate baseline for borrowing throughout the U.S. economy, confirmed Wednesday afternoon it opted to keep rates at the 4.25% to 4.5% range they’ve stood since December.
That was widely anticipated by Wall Street — CME Group’s FedWatch Tool indicated markets priced in just 0.1% odds of a cut this week – despite Trump’s repeated demands for the Fed to slash rates by a full percentage point.
Perhaps most crucial in the Fed’s update was the release of its quarterly summary of economic projections, or dot plot, revealing where the central bank expects the U.S. economy to head this year.
Fed staff upped their median December 2025 forecast for the unemployment and core inflation rates to 4.5% and 3.1%, respectively, both of which would be multiyear highs, and decreased its fourth-quarter real gross domestic product growth forecast from 1.7% to 1.4%.
Despite the bearish forecast, there was a glimmer of hope for bullish observers, as the Fed maintained its projection of two 25 basis-point rate cuts this year.
Recent economic data seems to satisfy the normal rate cut preconditions of steady inflation and a weakening labor market, but the Fed has been hesitant to take action as it normally may, citing the uncertain impact of Trump’s tariffs. To that end, Goldman Sachs economists expect inflation to rise from its most recent 2.5% to 3.3% by December, according to the Fed’s preferred inflation measure of core personal consumption expenditures. Goldman expects the dot plot to also reveal the Fed expects to see higher unemployment (four-year high of 4.5%) and lower economic growth (1.3% real gross domestic product growth), though the investment bank does expect the Fed to stand by its projection of two 2025 cuts.
Wednesday marked the latest in a long string of attacks on Powell. The monetary policy chief has been among the most frequent targets of Trump’s ire during the first five months of his second presidential term. Trump has repeatedly gone after the central banker as the Fed declines to cut rates to Trump’s liking. Trump called Powell a “numbskull” last week, and has frequently teased the possibility of firing Powell before his term expires next May.