US Fed keeps interest rates unchanged in face of Trump criticism

WASHINGTON - The US Federal Reserve held interest rates steady for a fourth consecutive meeting on June 18, forecasting higher inflation and cooler growth in 2025 as President Donald Trump’s tariffs begin to take hold and geopolitical uncertainty swirls.

Fed chairman Jerome Powell told reporters the central bank would make better decisions if it waited a few months, signalling the next rate cut could take some time to materialise.

The Fed kept the benchmark lending rate at a range between 4.25 per cent and 4.5 per cent at the end of its two-day meeting, with officials pencilling in two rate cuts in 2025, similar to earlier projections.

The move is likely to draw the ire of Mr Trump, who

has repeatedly pressured the independent central bank

for rate reductions, and on June 18 called Mr Powell “stupid” for not lowering rates more quickly.

“We have a stupid person, frankly, at the Fed,” Mr Trump said, hours before the bank was due to release its policy decision.

“We have no inflation, we have only success, and I’d like to see interest rates get down,” he added, speaking at the White House.

“Maybe I should go to the Fed. Am I allowed to appoint myself?“

The Fed said in a statement that “uncertainty about the economic outlook has diminished but remains elevated”.

The central bank also cut its expectations for economic growth in 2025 and raised its inflation and unemployment forecasts in updated projections.

Mr Powell told reporters he expects to learn more over the summer on the effects of tariffs, although the timeline remains unclear.

Increases in tariffs in 2025 “are likely to push up inflation and weigh on economic activity”, Mr Powell said.

Avoiding a more persistent effect depends on the size of levies, how long it takes for them to pass through to consumers, and keeping expectations anchored, he added.

Well-positioned

Mr Powell maintained that the Fed is well-positioned to wait to learn more, before considering changes to interest rates.

“Because the economy is still solid,” the central bank can take time to see what happens, Mr Powell said. “We’ll make smarter and better decisions if we just wait a couple of months.”

The Fed’s decision was in line with analysts’ expectations, with observers largely expecting policymakers to adopt a wait-and-see approach as they monitor the effects of Mr Trump’s

broad tariffs on the world’s biggest economy.

Major US indexes ended little-changed on June 18.

Mr Trump on June 18 insisted there was no need to worry about price increases.

While the President has imposed a 10 per cent tariff on most US trading partners and steeper levies on imports of steel, aluminium and autos in recent months, these have not triggered widespread price surges so far.

This is partly because Mr Trump has backed off from or postponed some of his most punishing salvos, while businesses are relying on existing inventory to avoid hiking consumer costs.

On June 18, the Fed cut its expectations for 2025 economic growth to 1.4 per cent from its March projection of 1.7 per cent.

It also raised its inflation forecast to 3 per cent and that of the unemployment rate to 4.5 per cent.

While officials pencilled in two rate cuts in 2025, more participants than before in its rate-setting committee were inclined towards keeping rates unchanged in 2025.

“The Fed would no doubt be cutting again by now if not for the uncertainty regarding tariffs and a recent escalation of tensions in the Middle East,” said KPMG senior economist Benjamin Shoesmith.

Asked about conflict in the Middle East as a clash between Israel and Iran hots up, Mr Powell said that although it was possible to see higher energy prices, these “don’t generally tend to have lasting effects on inflation”.

Mr Trump has pointed to benign US inflation in arguing for cuts.

More recently, he cast such a move as a way for the country to “pay much less interest on debt coming due”, overlooking the fact that lower interest rates usually raise consumer prices.

Mr Powell has maintained that the Fed’s rate-setting committee would make its decisions solely on objective and non-political analysis. AFP