WASHINGTON (TNND) — President Donald Trump renewed his complaints with the Federal Reserve after it left its benchmark interest rate unchanged following the conclusion of its January meeting on Wednesday, once again highlighting the political pressure over bringing down inflation.
The president did not call on the Fed to bring down rates this time but said it had failed to bring down inflation. The rate of price increases has slowed dramatically from the highs of over 9% seen in 2022 but remains stubbornly above the 2% target.
Trump has a history of pushing the Fed to lower interest rates regardless of the economic conditions the central bank is considering. He claimed last week that he understands rates better than the Fed and Powell and said he would make it known when he disagreed with its decisions.
That trend continued shortly after the Fed’s January meeting, with the president saying he would take bringing inflation down into his own hands.
“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,” Trump wrote on his social media network Truth Social. “If the Fed had spent less time on DEI, gender ideology, ‘green’ energy, and fake climate change, Inflation would never have been a problem.”
The Fed left its benchmark interest rate untouched at the conclusion of its meeting and changed its tone on inflation, removing references to its steady downward progress and saying it “remains somewhat elevated.”
“We expect the Federal Reserve will adopt an extremely reactive approach going forward, with policymakers heavily reliant on inflation and employment data to inform their decisions, potentially over-extrapolating short-term trends,” EY chief economist Gregory Daco said.
The Fed cut its benchmark rate three times, totaling a reduction of 1% over the last quarter of 2024 but also tempered expectations about further reductions as it waits to see Trump’s economic policies and whether inflation continues to slow. Powell said the Fed was comfortable with its wait-and-see approach on further rate cuts during his Wednesday press conference.
Along with getting the last lingering pieces of inflation out of the economy, the Fed is also anxiously watching to see what happens with Trump’s threats of widespread tariffs on some of the United States’ biggest trading partners. Economists have been concerned about new trade wars and tariffs restarting inflation.
“We don’t know what will happen,” Powell said. “We need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”
Powell was frequently asked about Trump and the comments he has made on the Fed but sidestepped the questions to avoid any additional tension with the White House.
“I’m not going to have any response or comment whatsoever to what the president said. It’s not appropriate for me to do so,” Powell said.
He has spoken carefully for the last two years to maintain the Fed’s credibility with investors about making rate decisions based on economic data and trends. Powell has also treaded lightly around directly confronting Trump on Fed or economic policy, instead messaging about the central bank’s ability to react and that it was working to align its policies with the flurry of executive orders Trump has signed since taking office.
Maintaining the Fed’s independence from political influence has been a priority for decades to ensure its moves are made on economic ramifications instead of political ones. Powell has maintained support on Capitol Hill, where lawmakers approve appointments to the Fed board in the Senate, cruising through two confirmation votes in 2018 by Trump and again in 2022 under President Joe Biden.
Michael Barr, a Biden appointee who led supervision of banks, voluntarily stepped down from the role to avoid butting heads with the White House.
“With Trump demanding ‘that interest rates drop immediately,’ we foresee intensifying pressure from the administration to influence Fed policy. Fortunately, the Fed has temporarily insulated itself from political pressures with Vice President for Supervision Barr stepping down from his supervisory role but staying on the Board, and Governor Kugler’s term expiring in January 2026,” Daco said.
Trump has said he would allow Powell to serve out the remainder of his term and Treasury Secretary Scott Bessent said during his confirmation hearings that the Federal Open Market Committee “should be independent.”
Trump will have limited room to remake the Fed’s makeup in the near future but will get to appoint Powell’s successor next year. Investors and economists will be watching closely for who Trump chooses and whether they will be willing to cede influence the White House over rate decisions.