The U.S. Federal Reserve (Fed) has kept the benchmark interest rate unchanged at its first monetary policy meeting of the year. The Fed noted that the U.S. economy is showing strong growth and that it needs to observe the impact of the new policies of the Trump administration on the economy, stating that there is no need to rush to lower the benchmark interest rate.
On the 29th (local time), the Federal Reserve concluded its Federal Open Market Committee (FOMC) meeting, deciding to maintain the benchmark interest rate at the existing 4.25 to 4.50%. Previously, the Fed had lowered the benchmark interest rate three times in September, November, and December of last year.
This FOMC meeting is the first held since Donald Trump took office as President of the United States. The Fed chose to maintain the rate despite Trump's public pressure for a rate cut. Jerome Powell, Chair of the Federal Reserve, emphasized at a press conference following the rate hold, "The Fed's monetary policy stance is significantly less restrictive than before, while the economy is strong. We do not need to rush to change our monetary policy stance."
Fed officials suggested a rate hold since December of last year. Although indicators of U.S. economic growth have not worsened, concerns over inflation have been lurking in the market, leading to the interpretation that the Fed is unlikely to lower the benchmark interest rate hastily. According to the minutes of the December FOMC meeting, Michelle Bowman, a Federal Reserve Commissioner, said, "Due to persistent inflation risks, the pace of rate cuts is bound to slow down," adding, "I continue to prefer a cautious and gradual approach to policy adjustment."
Moreover, the forecast that high tariffs from President Trump’s key campaign promises will negatively impact inflation suggests that the Fed has adopted a wait-and-see attitude. Powell stated, "We still do not know what will happen regarding tariffs, immigration, fiscal policy, and regulations, and we need to wait for a clear presentation of what specific policies will be to reasonably assess their impact on the economy."
Separately from the Fed's decision, President Trump continues to exert pressure for a rate cut. In a virtual speech at the World Economic Forum (WEF) on the 23rd, he stated, "As oil prices drop, I will demand that rates be lowered immediately," and insisted, "Similarly, rates should drop globally." Following the Fed's announcement of the rate hold that day, he heightened his criticism on social media, saying, "The Fed has been terrible regarding bank regulation."
Despite Trump's attempts to shake the Fed, Powell reaffirmed his commitment to preserving its independence. He stated at the press conference that day, "We will focus on achieving our goals using our policy tools while quietly fulfilling our mandate."