Federal Reserve likely to defy Trump, keep rates unchanged

The Federal Reserve will likely keep its key short-term interest rate unchanged on Wednesday, despite weeks of harsh criticism and demands from President Donald Trump that the Fed reduce borrowing costs.

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After causing a sharp drop in financial markets two weeks ago by saying he could fire Fed Chair Jerome Powell, Trump subsequently backed off and said he had no intention of doing so. Still, he and Treasury Secretary Scott Bessent have said the Fed should cut rates.

They argue that inflation has steadily cooled and high borrowing costs are no longer needed to restrain price increases. The Fed sharply ramped up its short-term rate in 2022 and 2023 as pandemic-era inflation spiked.

Separately, Elon Musk, the head of Trump's Department of Government Efficiency, last Wednesday suggested that DOGE should look more closely at the Fed's spending on its facilities.

The heightened scrutiny shows that even as the Trump administration backs off its threats to fire Powell, the Fed is still subject to unusually sharp political pressures, despite its status as an independent agency.

Even so, the Fed will almost certainly leave its key rate unchanged at about 4.38 when it meets Tuesday and Wednesday. Powell and many of the other 18 officials that sit on the Fed’s rate-setting committee have said they want to see how Trump's tariffs affect the economy before making any moves.

Trump, however, on Friday said on the social media platform Truth Social that there is “NO INFLATION" and claimed that grocery and egg prices have fallen.