In the latest Daily news highlights, the Federal Reserve (Fed) is expected to keep its key interest rate unchanged during its important policy meeting this Wednesday. This decision may cause more tension with President Donald Trump, who has repeatedly demanded a large interest rate cut.
Trump wants the Fed to lower the rate by a full percentage point to boost the economy. However, the Federal Reserve, which operates independently from the White House, is taking a cautious approach.
1. Fed to Maintain ‘Wait-and-See’ Approach
The Federal Reserve is likely to continue with its careful “wait-and-see” strategy. According to the CME Group’s FedWatch tool, there is almost a 100% chance the Fed will leave its benchmark interest rate unchanged this week. This is based on futures trading data that predicts rate movements.
2. Concerns Over Tariffs and Inflation
Many Federal Reserve officials are worried about how Trump’s import tariffs could affect the economy. They fear these tariffs might increase inflation, which has finally started to calm down after a big rise during the post-pandemic period. The Fed’s target is to keep inflation at around 2% annually.
Because of this, the Fed is not rushing to lower interest rates. Trump has criticized this decision and even insulted Fed Chair Jerome Powell, calling him a “numbskull” for not acting faster to support the economy.
3. The Fed’s Dual Responsibility
The Federal Reserve has two main goals:
- Keep inflation low
- Maintain high employment
Trump’s tariffs make this job harder. On one hand, tariffs could raise prices, which pushes inflation up. On the other hand, they could hurt businesses and reduce jobs, increasing unemployment. The Fed must carefully decide whether it’s better to keep interest rates high to control inflation or lower them if the job market starts weakening.
4. Recent Economic Data Suggests No Urgent Change
Recent reports show that the job market is stable and inflation is under control. This gives the Fed more confidence to hold interest rates steady for now. According to Michael Feroli, chief U.S. economist at JPMorgan Chase, no member of the Federal Open Market Committee (FOMC) is currently pushing for a rate change.
Why Interest Rates Matter
The federal funds rate is the main tool the Fed uses to manage the economy. This rate affects how much banks charge each other to borrow money. That also affects what consumers pay for car loans, credit cards, mortgages, and other types of borrowing.
During the COVID-19 pandemic, the Fed cut interest rates to near zero to help the economy. Starting in 2022, it raised rates to their highest levels in over 20 years to fight rising prices. When inflation started to cool in 2024, the Fed began cutting rates again. However, after Trump won the election, the Fed decided to keep rates unchanged, waiting to see how the economy will react.
What Comes Next?
This week’s Breaking News from the Federal Reserve will be closely watched. If inflation stays low and the job market remains strong, the Fed may continue holding interest rates steady. But if economic risks grow, especially due to tariffs or global slowdowns, the central bank might have to act.
For now, the Fed is focused on stability, choosing not to rush into any big moves. Stay tuned to our Daily news highlights for updates on how this decision affects interest rates, loans, and the broader U.S. economy.
