The US Federal Reserve kept its main interest rate unchanged on Wednesday, holding firm at 4.3% for the fourth straight meeting despite worsening economic forecasts.
The decision reflects the central bank’s cautious approach as officials face slower growth, higher inflation, and a rising jobless rate. New projections show the Fed expects the economy to expand just 1.4% this year, down from last year’s 2.5%, with unemployment rising to 4.5%.
Inflation remains above the bank’s target, climbing to 2.4% in May. Fed chair Jerome Powell warned that price pressures could increase further as companies pass along the cost of new import tariffs. He said the full impact of these levies is difficult to predict.
“That is why we think the appropriate thing to do is hold where we are,” Powell said.
President Donald Trump has repeatedly urged the central bank to cut rates, while rolling out tariffs that have disrupted global trade. On Wednesday, he lashed out again, calling Powell “stupid” and accusing the bank of acting too slowly.
Despite the political pressure, the Fed continues to operate independently. Its forecasts suggest interest rates may fall slightly next year but could remain elevated through 2027.
The decision to hold rates comes as other central banks shift course. The European Central Bank has cut rates eight times since last summer. The Bank of England lowered borrowing costs last month but is expected to pause further changes this week.
Investment experts say the Fed appears determined to wait for more clarity. Isaac Stell of Wealth Club said central bankers are unlikely to bow to outside demands.
“Unless there’s a truly compelling reason to cut, they might just stay sat on the fence,” he said.
The Fed’s benchmark rate influences everything from mortgage costs to business loans. Although lower than last year’s peak, it remains well above the levels seen between 2008 and 2022.
Related Readings:
