Fed holds interest rates steady amid uncertainty over Trump’s impact on economy
Fed holds interest rates steady amid uncertainty over Trump’s impact on economy
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President has made clear he wants rates to fall as benchmark interest rate now sits at a range of 4.25% to 4.5%. Federal Reserve officials decided on Wednesday to hold interest rates steady as uncertainty over Donald Trump’s impact on the US economy looms and inflation remains above the central bank’s target levels.
This is the first time Fed policymakers have met since the president, who has made clear he wants rates to fall, returned to the White House. The benchmark interest rate now sits at a range of 4.25% to 4.5%. While the Fed has been cutting rates since the fall, this decision amounts to the first time it has not reduced them since September.
The Fed uses interest rates to balance price increases and stability in the labor market. During the pandemic, interest rates were at near-zero levels, making it cheaper for Americans to borrow money for payments such as mortgages, car loans and other types of debt.
But a host of economic influences – supply chain issues, federal stimulus and high consumer spending, for example – drove inflation up to 9.1%, its highest level in a generation, in the summer of 2022. Since then, the Fed has been in a long fight to tamp down price increases. Interest rates sat at approximately 5.3% for a year and a half – the highest interest rates in over a decade – before the Fed started its cutting campaign in September.
Even though inflation has gone down since that time, it has remained stubbornly above the Fed’s target rate of 2%. In December, inflation was at 2.9%, a slight uptick compared with November. Meanwhile, the jobs market showed an unexpected surge of growth last month, with more than 250,000 jobs added to the economy. The unemployment rate has remained at relatively low levels, about 4%.
