The Federal Reserve held its benchmark interest rate steady at 3.6% during its latest meeting, with no changes expected in the near term. The decision comes amid political pressure and legal scrutiny surrounding Fed Chair Jerome Powell.
Immediate Action & Core Facts
The Fed’s Federal Open Market Committee (FOMC) unanimously voted to maintain the current rate, following three quarter-point cuts in 2024. Markets anticipate one or two additional cuts this year, likely in June and December, based on futures pricing. Meanwhile, President Donald Trump has hinted at nominating a replacement for Powell, potentially announcing the decision this week.
Deeper Dive & Context
Economic Outlook and Policy Stance
Fed Chair Jerome Powell reiterated that the central bank will adopt a wait-and-see approach, allowing previous rate cuts to take effect. Economic forecasts suggest GDP growth of 2.4% in 2025 and 2.2% in 2026, with inflation expected to align with the Fed’s 2% target by 2027. Unemployment is projected to rise slightly to 4.5% by year-end before stabilizing.
Political and Legal Pressures
Powell faces scrutiny after the Justice Department subpoenaed the Fed over testimony related to a $2.5 billion building renovation. Powell has dismissed the investigation as politically motivated, stating it is a "pretext" to pressure the Fed into deeper rate cuts. Meanwhile, Trump has publicly criticized Powell’s leadership and advocated for lower rates, even suggesting a target of 1%.
Market and Expert Reactions
A CNBC survey of economists and Wall Street analysts predicts only two more rate cuts this year, with no further reductions expected in 2027. The survey suggests the Fed will maintain rates around 3% through 2027, despite Trump’s calls for aggressive cuts. Analysts cite improving economic growth and declining recession risks as factors supporting a cautious Fed stance.
Future Uncertainty
The Fed’s long-term direction remains uncertain, particularly if Trump appoints a new chair. However, experts believe the next Fed leader will likely continue a moderate policy approach, with only modest adjustments to rates. Powell’s post-meeting press conference will provide further clarity on the Fed’s stance amid ongoing political and economic challenges.