US Fed Keeps Rates Steady Despite Trump's Pressure To Resume Cuts

The US Federal Reserve has kept the benchmark lending rates unchanged at 4.25-4.5% — the same where it has been since the onset of Donald Trump's presidency earlier this year.

The decision to keep the rates steady was taken by the Federal Open Market Committee by a majority of 9-2. The dissenting members were governors Michelle Bowman and Christopher Waller, both of whom have earlier advocated for acknowledging the easing of consumer inflation.

This marks the first instance since 1993 when two Fed governors have opposed a decision.

The FOMC, in its statement, said the committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. At present, the uncertainty about the economic outlook remains "elevated", it added.

"Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated," it added.

Road Ahead

The Jerome Powell-led Fed has again defied US President Donald Trump's persistent appeals to slash the federal fund rates. The decision was in-line with the market expectations.

The “Dot plot” of rate projections, however, signals a lowering of the key lending rates by 50 basis points in 2025. This indicates that two rate cuts of quarter-point each could be on the cards in the year ahead. This is the same as what was projected in March.

Going ahead, the FOMC will assess incoming data, the evolving outlook, and the balance of risks while deciding to adjust the rates, the statement said.

"The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2% objective," it added.

In assessing the appropriate stance of monetary policy, the FOMC will continue to "monitor the implications of incoming information for the economic outlook". The rate-setting panel will be prepared to adjust the stance of monetary policy as appropriate if risks emerge that "could impede the attainment" of inflation and growth targets, it further said.

"The committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments," it further said.