Powell doesn't bow to Trump pressure; US Fed keeps interest rate unchanged - here's what the FOMC statement said

“In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the FOMC statement read.

“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. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate,” it said.


Experts had widely anticipated that the Federal Reserve will maintain current interest rates during Wednesday's meeting, continuing its stance from earlier this year, following the rate reductions implemented late last year. Federal Reserve Chairman Powell has said in the past that additional data regarding tariff impacts on inflation and economic conditions is necessary before implementing any policy changes.

Earlier in the day Trump responded on Wednesday to reports of 3% annual GDP growth in the second quarter, using this information to advocate for rate reductions. "WAY BETTER THAN EXPECTED!" Trump posted on Truth Social, leveraging the positive growth figures to urge Federal Reserve Chairman Jerome Powell to reduce benchmark interest rates.

However, this economic data requires contextualisation: Following a 0.5% decline in the first quarter, when businesses accelerated imports to avoid tariff implementation, GDP showed improvement. The second-quarter recovery suggests an annual growth rate of 1.3% for the initial half of 2025, significantly lower than the 2.8% growth achieved in 2024.

Trump's proposal to reduce the benchmark rate from 4.25%-4.50% drastically appears disconnected from current economic conditions. This suggestion seems more appropriate for rescuing an economy from recession, rather than addressing the present steady economic environment observed since the Fed's previous meeting.

Traditionally, the Federal Reserve implements rate reductions when economic indicators show weakness and rising unemployment becomes a concern.

The 3% economic indicator may not fully represent the actual economic situation. Following a contraction of 0.5% annually in the initial quarter, economists calculate an average growth of 1.25% for the first six months. Should this economic slowdown persist, the Federal Reserve might implement rate reductions by September.

The Federal Reserve's two-day meeting follows a period of unusual exchanges with the Trump administration, where Powell faced criticism over his handling of a substantial £2.5 billion office renovation project. Although Trump initially suggested the escalating costs could warrant dismissal, he has since softened his stance on the matter.

In a distinct departure from conventional economic thinking, Trump advocates for interest rate reductions despite strong economic performance. This stance contrasts sharply with mainstream economists, who maintain that a robust and expanding economy typically does not require interest rate cuts.

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