The United States Federal Reserve left its key lending rate unchanged Wednesday, January 29, resisting pressure from President Donald Trump to continue with cuts in the first-rate decision since his return to office. Policymakers voted unanimously to keep the Fed's benchmark lending rate at between 4.25 percent and 4.50 percent, the Fed announced in a statement. The decision marked a pause following three consecutive rate reductions, which lowered the Fed's key lending rate by a full percentage point.
"The unemployment rate has "stabilized at a low level in recent months, and labor market conditions remain solid," the Fed said. It added that inflation "remains somewhat elevated" while removing a reference in earlier statements to inflation making progress towards the bank's long-term target of two percent. Federal Reserve Chair Jerome Powell said Wednesday the US central bank does not need to rush to adjust interest rates: "We do not need to be in a hurry to adjust our policy stance," Powell told reporters, saying the world's biggest economy remains solid. He added that he would not respond or comment on Trump's recent remarks that he would demand lower interest rates: "It's not appropriate for me to do so."
The US central bank has a dual mandate from Congress to act independently to tackle inflation and unemployment. It does so primarily by raising or lowering its key short-term lending rate, which influences borrowing costs for consumers and businesses. Most analysts agree that the US economy is going fairly well, with robust growth, a largely healthy labor market, and relatively low inflation which nevertheless remains stuck above the Fed's target. Futures traders see a probability of close to 80% that the Fed will extend its pause at the next rate meeting in March, according to data from CME Group.
Since returning to office on January 20, Trump has revived his threats to impose sweeping tariffs on US trading partners as soon as this weekend and to deport millions of undocumented workers. He has also said he wants to extend expiring tax cuts and slash red tape on energy production. Last week, Trump also revived his criticism of the independent Fed and Powell, whom he first appointed to run the US central bank. "I'll demand that interest rates drop immediately," he said, later adding that he would "put in a strong statement" if the Fed did not take his views on board.
Most – though not all – economists expect Trump's tariff and immigration policies to be at least mildly inflationary, raising the cost of goods faced by consumers. "I think those policies are definitively inflationary, it's just a question of what degree," said Zandi from Moody's Analytics. "A big part of (the Fed's) job in calibrating monetary policy is responding to what lawmakers are doing, and if they can't get a fix on what they're doing, then that just argues for no change in policy, either higher or lower rates," he added.