Fed Prepares Its First Interest Rate Decision with Trump Back in Office
Fed Prepares Its First Interest Rate Decision with Trump Back in Office Central Bank Expected to Hold Rates Steady, Despite Trump’s Calls for Cuts
The Federal Reserve is expected to keep interest rates unchanged during its first policy meeting of the second Trump administration, despite President Donald Trump’s calls for further cuts. Trump, who has repeatedly pressured the central bank to lower rates, stated at the World Economic Forum in Davos, Switzerland, that interest rates should drop globally.
“I’ll demand that interest rates drop immediately,” Trump said via videoconference last week. “And likewise, they should be dropping all over the world. Interest rates should follow us all over.”
This remark continues Trump’s tradition of publicly commenting on monetary policy, a practice U.S. presidents typically avoid to maintain the Fed’s autonomy. Trump, who appointed Fed Chairman Jerome Powell in 2017, added, “I know interest rates much better than they do,” reinforcing his position.
The Fed’s decision will be announced at 2 p.m. ET on Wednesday, followed by Powell’s remarks around 2:30 p.m.
The U.S. economy is in a much different place than it was when Trump left office in January 2021, with the country in the midst of the Covid-19 pandemic. Inflation, which spiked during the pandemic, has now been largely brought under control at 2.9% as of December, though it has remained above the Fed’s 2% target. Unemployment dropped to 4.1% in December, as the job market has remained resilient despite signs of cooling.
Consumer spending, a key driver of the economy, has continued to grow, with GDP expanding by at least 3% for two consecutive quarters. Analysts see these metrics as signs that the economy is still performing well and does not yet need a boost from the Fed.
Wall Street anticipates that the Fed will keep rates steady this week, with two potential cuts later in the year. Elizabeth Renter, senior economist at NerdWallet, noted, “While many households and businesses have felt the pressure of this high-rate environment, the economy remains strong. Consumer spending has remained robust, contributing to economic strength.”
After three consecutive rate cuts, the Fed has reduced the benchmark rate from a 20-year high of 5.25%-5.5% to the current 4.25%-4.5%. However, economists warn that balancing the need to control inflation without pushing the economy into a recession has become more difficult, especially with Trump’s upcoming economic policies, such as tariffs.
Renter described the situation as “particularly tricky,” especially with the new administration in place. “Talk of policies that carry additional inflationary risk carry more weight now that the new administration is in place and beginning work,” she said.
The path for rate cuts remains uncertain, according to Joe Brusuelas, chief economist at RSM. “Federal Reserve officials won’t say it, but it’s clear that the central bank’s decisions this year will be shaped by the Trump administration’s policies on trade and immigration,” Brusuelas said. “These policies could lead to higher inflation or raise inflation expectations, putting the Fed’s 2% inflation target at risk.”
As the Fed navigates these challenges, the central bank’s decisions will continue to play a critical role in shaping the U.S. economy. For those who are following trends in disposable vapes, much like the unpredictability of interest rates, the landscape of Mr. Fog vape flavors, Mr. Fog disposable vapes, and Mr. Fog vapes remains ever-changing, with new and exciting options emerging for users to explore.
