The Federal Reserve kept benchmark interest rates steady on Wednesday, defying President Trump’s call for a large cut to juice the economy.
The central bank’s Federal Open Market Committee decided to keep the benchmark rate between 4.25% and 4.5%, given the uncertainty around Mr. Trump’s trade policies and the rate of inflation.
“Uncertainty about the economic outlook has diminished but remains elevated,” the committee said.
Fed officials cut rates multiple times in 2024 as inflation cooled, though they haven’t budged on rates since the start of this year.
The Fed is on track for two rate cuts later in the year, but it is raising concerns about the potential for slower growth and higher inflation.
Mr. Powell said Mr. Trump’s tariffs on imported goods could cause short-lived inflation.
“It’s also possible the inflationary effects could be more persistent,” Mr. Powell said, adding it depends on the magnitude of tariffs after Mr. Trump’s negotiations with other nations. The president has set a July 9 deadline for deciding tariff rates.
Mr. Powell says the Fed needs to take it slow because it could be caught between controlling inflation and spurring economic growth due to tariffs and other economic policies. He said the U.S. economy is healthy, with an unemployment rate of 4.2% and inflation at 2.4% over the past 12 months.
“For the time being, we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” he said.
Some Fed officials are estimating a rate path that involves cuts, and “that’s them saying, ‘Yes, I think we will get to a place, more likely than not, where cuts will be appropriate,” Mr. Powell said. “Remember how much uncertainty we face, though.”
Mr. Trump is furious over inaction at the Fed. He wants the central bank to cut interest rates by one or two full points because, so far, inflation has been tame during his second term. He said such cuts would save the Treasury hundreds of billions in interest payments.
The president also said U.S. borrowers deserve more affordable terms as he enacts his sweeping economic agenda.
Mr. Trump has attacked Mr. Powell with demeaning nicknames, including “Too Late,” and says Europe is cutting rates, so the U.S. should, too.
“We have a stupid person at the Fed. He probably won’t cut today,” Mr. Trump said Wednesday before the Fed announcement. “He’s costing the country a fortune.”
The Fed is an independent agency that is supposed to be free from direct political pressure. The president appoints a Fed chairman every four years, but does not have the authority to fire the chairman.
Mr. Powell’s term as chair ends May 2026.
Mr. Trump in April shot down speculation that he would try to oust Mr. Powell, saying he had “no intentions of firing him.”
“I call him Too-Late Powell because he’s always too late,” Mr. Trump said Wednesday. “Maybe I should go to the Fed.”
Mr. Trump is calling for lower rates while the Senate debates a tax-and-spending bill that Republicans muscled to passage in the House.
Mr. Trump said the tax cuts are needed to complement his trade and deregulation agenda.
House Ways and Means Committee Jason Smith, Missouri Republican, praised Mr. Trump for lowering inflation rates and spurring private investment in the U.S. economy.
“Now, it is Congress’ turn to deliver the pro-growth, pro-America tax policy in The One, Big, Beautiful Bill that will usher in a golden age for the American economy and put the American dream back within reach for millions,” Mr. Smith said.
Democrats on Wednesday said Mr. Trump hadn’t done enough to address the cost of living for American families.
“Instead, he’s pushing reckless trade policies, trying to kick 16 million people off their health care, and risking a debt crisis — all to give billionaires more tax breaks,” said Rep. Brendan Boyle, Pennsylvania Democrat, who was referring to the potential outcome from the GOP’s tax-and-spending legislation. “Working families can’t afford Donald Trump.”
• Tom Howell Jr. can be reached at thowell@washingtontimes.com.