By President Donald Trump took Federal Reserve officials to task after they left interest rates unchanged following their first policy meeting since he returned to office.
“Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing,” he wrote on his Truth Social platform, referring to Federal Reserve Chair Jerome Powell.
“If the Fed had spent less time on DEI, gender ideology, ‘green’ energy, and fake climate change, Inflation would never have been a problem,” he said.
Trump raised pressure on policymakers to drive rates lower last week, extending his habit of publicizing his views on monetary policy — something presidents have long avoided to maintain the Fed’s autonomy from politics.
But the central bank opted to sit tight for now.
In their news release announcing the decision — which analysts typically parse for signs of the path ahead — Fed officials struck a more cautious tone on inflation. They removed part of a line in their previous release saying inflation “has made progress toward” a goal of 2%, noting in Wednesday’s statement only that it “remains somewhat elevated.”
Powell said at a news conference after the announcement that recent inflation data looked “good” but that “we’re not going to over-interpret two good or two bad [inflation] readings.”
He also told reporters earlier Wednesday, before Trump’s Truth Social post, that he wouldn’t comment “whatsoever on what the president said” about interest rates.
“The public should be confident that we will continue to do our work as we always have,” he said.
Powell said he hasn’t had any direct contact with Trump. “Lots of research shows [independence is] the best way for a central bank to operate,” he said.
All three major stock indices closed lower on the heels of the decision, which leaves interest rates uncomfortably high for many borrowers on everything from auto loans to mortgages. Consumer prices averaged 2.9% higher in December than the same period a year earlier — an annual rate that has hovered for months above the Fed’s 2% target.
Trump has positioned himself as the solution to lingering flaws in what analysts broadly agree is a solid economy.
In a videoconference address to the World Economic Forum in Davos, Switzerland, last week, Trump said he’d “demand that interest rates drop immediately.”
“I know interest rates much better than they do,” he said of Fed officials — shortly after he said by videoconference that he’d “demand that interest rates drop immediately.” Trump has also recently ramped up his criticism of Powell, whom he appointed in 2017 and has promised not to try to remove before Powell’s term ends in May 2026.
Consumer spending has held steady in recent months, helping prop up economic growth.Yuki Iwamura / Bloomberg via Getty Images file
The U.S. economy has changed dramatically since Trump left office in January 2021, when the country was still gripped by the Covid-19 pandemic and bitter disputes over lockdown measures to combat it.After a pandemic-era run-up in prices that devastated many consumers’ finances, inflation has been curtailed dramatically. Unemployment edged down to 4.1% in December from 4.2% the month before after employers added over a quarter-million jobs, helping tamp down worries about a labor market that has remained sturdy even as it cools.
Consumer spending has held steady despite households’ increasing focus on value. Gross domestic product — driven largely by the consumption of goods and services — has grown by at least 3% for two straight quarters, federal researchers said in December.
Analysts see those and other metrics as signs that the economy is still humming along despite the inflation fight’s difficult “last mile,” which would reduce the need for a fresh boost from the Fed just yet. The central bank has penciled in two rate cuts this year after it lowered them for three consecutive meetings, whittling its benchmark rate from a 20-year high range of 5.25%-5.5% to the current 4.25%-4.5%.
“We think disinflation continues on a slow and sometimes bumpy path,” Powell said Wednesday. “We don’t need to be in a hurry to adjust our policy stance.”
Bankrate Chief Financial Analyst Greg McBride put the situation more bluntly: “The progress toward 2% inflation has stalled out, and the Fed knows it,” he said in a statement Wednesday. “They gave no indication in their post-meeting statement that a resumption of rate cuts is likely at the next meeting in March. It will take a run of good inflation data to get us there, whenever that may be.”
Economists say the delicate dance of keeping borrowing costs elevated enough to wrestle price growth lower without pushing the economy into a recession has become more complicated. That’s largely because of Trump’s economic agenda — particularly tariffs, with his first policy move on that front expected Saturday.
Asked about the potential economic impact of tariffs, Powell said, “The range of possibilities is very wide.”
“We don’t know for how long or how much, what countries. We don’t know about retaliation. We don’t know how it’s going to transmit through the economy to consumers,” he said.
Whatever the eventual outcome, “it’s clear that the central bank’s decisions this year will be shaped by the Trump administration’s policies on trade and immigration,” Joe Brusuelas, chief economist at the financial firm RSM, wrote in a note Tuesday ahead of the rate announcement. “These policies could lead to higher inflation, or, just as important, raise inflation expectations, which would put the Fed’s long-held 2% inflation target at risk.”
