Why did Fed keep interest rates unchanged despite Trump's pressure?

Time of India

6 days ago

The Federal Reserve maintained its key short-term interest rate, defying President Trump's persistent calls for a reduction. The rate remains at 4.3%, a level established after three cuts last year, with officials citing the need to assess the impact of Trump's tariffs on inflation and the economy.
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Washington: The Federal Reserve left its key short-term interest rate unchanged for the fifth time this year, brushing off repeated calls from President Donald Trump for a cut.The Fed's decision Wednesday leaves its key short-term rate at about 4.3%, where it has stood after the central bank made three cuts last year. Chair Jerome Powell has said the Fed would likely have cut rates already if not for Trump's sweeping tariffs. Powell and other Fed officials say they want to see how Trump's duties on imports will impact inflation and the broader economy. So far the duties have lifted costs of some goods, such as appliances, furniture, and toys, and overall inflation has risen a bit, though less than many economists had expected.There were some signs of splits in the Fed's ranks: Governors Christopher Waller and Michelle Bowman voted to reduce borrowing costs, while nine officials, including Powell, favoured standing pat. It is the first time in more than three decades that two of the seven Washington-based governors have dissented. One official, Governor Adriana Kugler, was absent and didn't vote.The choice to hold off on a rate cut will almost certainly result in further conflict between the Fed and White House, as Trump has repeatedly demanded that the central bank reduce borrowing costs as part of his effort to assert control over one of the few remaining independent federal agencies.