Federal Reserve officials decided to keep interest rates steady, despite pressure from President Trump to lower them. Consumer prices remained elevated above the Fed’s 2% target, with inflation hovering at 2.9% in December. The stock market reacted cautiously after the decision, as Fed Chairman Jerome Powell is expected to address interest rates and the economy.
Trump has urged for immediate interest rate drops, continuing his public commentary on monetary policy, a practice traditionally avoided by U.S. presidents to maintain the Fed’s independence. The U.S. economy, still grappling with the effects of the Covid-19 pandemic, has seen inflation decrease and unemployment drop to 4.1% in December. Consumer spending has remained steady, supporting GDP growth of at least 3% for two consecutive quarters.
Analysts believe the economy is still performing well despite challenges in controlling inflation, leading the Fed to hold off on further rate cuts for now. The central bank has reduced rates from a 20-year high to the current range of 4.25%-4.5%, with potential changes based on Trump’s economic policies, such as expected tariffs. The complexity of balancing borrowing costs to control inflation without triggering a recession is heightened by the new administration’s policies on trade and immigration, which could impact inflation expectations and the Fed’s 2% target.
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