Ignoring Trump's pressure, Jerome Powell-led US Federal Reserve expected to keep interest rates unchanged

The US Federal Reserve is widely expected to keep its benchmark interest rate unchanged at around 4.3% when it concludes its two-day policy meeting on Wednesday, resisting pressure from President Donald Trump and his administration to cut borrowing costs.
Despite Trump's repeated demands for a rate cut and claims that inflation is no longer a concern, Fed Chair Jerome Powell and other officials have signalled caution, citing uncertainty over the economic impact of new tariffs. “That's a Fed that is going to have to wait for evidence and be slow to adjust on that evidence,” said Vincent Reinhart, chief economist at BNY, referencing the Fed's previous misjudgement when it assumed post-pandemic inflation would be “transitory.”
Trump has used his social media platform Truth Social to assert that there is "NO INFLATION," citing falling gas prices and cheaper groceries. However, government data contradicts this narrative. Grocery prices have increased 2.4% over the past year, while average gas prices, though down 10% from last year, remain at $3.18 a gallon according to AAA.
Economists argue that without the inflationary threat posed by tariffs, the Fed might have considered lowering rates to stimulate borrowing and growth. “You could imagine a world where there isn't pressure from the Trump administration and they cut rates ... sooner,” said Preston Mui, economist at Employ America, suggesting that political interference has made a rate cut more complicated.
Powell has acknowledged that tariffs could lead to a “one-time price increase” but warned they “could also be more persistent,” indicating a prolonged wait before any policy shift. Some economists believe the Fed might not ease rates until September or later, though market pricing shows expectations of a potential cut as early as July if economic conditions deteriorate.
Amid this uncertainty, political scrutiny of the Fed continues to rise. Elon Musk, who heads Trump’s Department of Government Efficiency, criticised the Fed for spending $2.5 billion on building renovations. “Since at the end of the day, this is all taxpayer money, we should certainly look to see if indeed the Federal Reserve is spending $2.5 billion on their interior designer,” he said.
The Fed defended the costs, citing post-pandemic spikes in construction expenses and local zoning laws requiring underground expansion.
Former Fed governor Kevin Warsh, seen as a possible successor to Powell, added to the criticism, stating, “The Fed's current wounds are largely self-inflicted,” and called for a “strategic reset” to restore credibility.
Nevertheless, Powell maintains that the institution’s independence remains intact. “Fed independence is very widely understood and supported in Washington, in Congress, where it really matters,” he said last month.