Federal Reserve Defies Trump, Keeps Interest Rates Steady

The Federal Reserve defied President Donald Trump's calls for interest rate cuts and kept a key lending rate steady on Wednesday.

Fed Chairman Jerome Powell and the rate-setting Federal Open Market Committee voted to keep its key lending rate between 4.25 and 4.50 percent.

It had cut the rate by a full percentage point with three rate cuts between September and December 2024.

The Fed has signaled rates will remain on a pause until inflation and labor data change.

At a news conference after announcing the rate cut pause, Powell noted that inflation has come down over the past two years but remains higher than desired.

"We do not to be a hurry to adjust our policy stance," Powell said.

Stock prices dropped after the initial message on the interest rates dropped a line about inflation getting closer to goals.

Powell said that there wasn't any shift in policy by the Fed but was simply cleaning up some wording in the message.

Stocks started a rebound as the news conference continued.

President Trump said last week he would "demand" that interest rates drop immediately but the central bank has a dual mandate from Congress to tackle both inflation and unemployment and doesn't have to listen to the president.

Powell indicated that he had not had any recent conversations with the president.

Inflation has stubbornly remained above the Fed's 2% target and the job market and overall market remain strong, making it harder for policymakers to justify further rate cuts.

Trump's tariff threats are also raising concerns over increasing inflation.

The Fed's benchmark short-term lending rate influences how much consumers pay on credit card and car lending rates.

Mortgage rates are more closely tied to 10-year Treasury bond rates, which rose slightly immediately after the Fed's interest rate decision.

The Fed reduced the number of expected rate cuts they expect this year to two, according to minutes of its previous meeting.