Fed Holds Rates at 4.5% as Powell Stresses Patience Despite Trump’s Push for Cuts

Roughly six months have passed since the Federal Reserve halted its run of interest‑rate reductions, and the central bank is still in wait‑and‑see mode as it assesses the economic ripples from President Donald Trump’s trade agenda and other policies that cloud the outlook.
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When the Federal Open Market Committee ends its two‑day meeting Wednesday, officials are expected to leave borrowing costs unchanged for a fourth straight time, preferring caution until the picture clears.

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So far the expansion has remained sturdier than many feared and inflation has stayed muted, giving policymakers space to be patient.
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But the Fed’s dual mandate requires an awkward balancing act: sustained trade tension could slow growth and unsettle markets, normally an argument for lower rates, yet the same tariffs can lift input costs and eventually consumer prices, which could justify tighter policy. Some analysts warn that inflation linked to tariffs may emerge more slowly than signs of a weakening economy.
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Chair Jerome H. Powell’s press conference should offer the sharpest insight into how he and his colleagues weigh those risks.
The committee will also refresh the “dot plot,” the diagram that reveals each participant’s preferred rate path and growth forecast, a chart Wall Street pours over every quarter.
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Complicating the calculus are President Trump’s frequent demands for rate cuts aimed at averting any slowdown. Even after a private Oval Office meeting with Powell last month the president renewed his criticism, calling the chair a “numbskull” and arguing that cheaper credit would “greatly reduce interest rates,” although he ruled out removing Powell, who is in his final year.
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While political pressure mounts, the Fed is wary of moving too soon, mindful of its slow response to post‑pandemic inflation that once pushed prices far above the two‑percent target.
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Recent consumer‑price data have been calmer, helped by cheaper energy, but Powell has cautioned that tariffs are “highly likely” to give inflation a temporary lift that could last longer than models predict. In addition, conflict between Iran and Israel threatens to disrupt oil flows, potentially driving gasoline higher and inserting fresh inflationary heat.
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Tariffs pose a double shock: they complicate supply chains, making it harder to produce goods, while simultaneously nudging prices upward.
The erratic way the administration has announced, delayed, trimmed, and sometimes doubled import levies has left companies guessing, and many firms have parked investment plans until policy stabilizes.
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Under one optimistic scenario, the effective tariff rate settles near ten percent, causing a one‑off price jump that then fades, clearing the way for what Governor Christopher J. Waller calls a “good news” rate cut later this year—assuming the labor market remains healthy. Other officials note that the piecemeal rollout could reshape expectations in ways the textbooks do not capture.
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Atlanta Fed President Raphael Bostic recently pointed out that classical models assume tariffs hit once and everyone immediately adjusts, “but that has not been our reality,” he said, adding that the drawn‑out process makes it harder to predict how households and businesses will respond.
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Back in September both investors and policymakers penciled in as many as four rate cuts for 2025, arriving before the November election. By December that median projection had slipped to two.
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Participants will update those forecasts this week, after leaving them unchanged in March. Markets will scrutinize the new dots for any sign that caution is giving way to concern, or that patience still rules.
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For now consensus is straightforward: the Fed will stay on hold, eyes fixed on incoming data, ready to pivot only when policy fog lifts or inflation forces its hand.
The next few months will reveal whether trade friction and geopolitical tension divert the economy or whether underlying strength allows the central bank to wait a little longer.
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Recent purchasing‑manager and small‑business surveys still indicate growth, but capital‑expenditure intentions have softened as managers struggle to price future inputs.
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Wall Street will watch not just the median 2025 dot but also the spread of projections; a wider band would highlight the unusual uncertainty gripping the committee.
Powell is expected to repeat that decisions remain “meeting by meeting” and that officials need “greater confidence” inflation is heading securely toward two percent before easing.

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