US Fed to hold interest rates steady as pressures mount

The US Federal Reserve officials are widely expected to leave interest rates unchanged Wednesday as they await clarity on the Trump administration’s trade policies, a move likely to frustrate the president and anyone else seeking answers about the US central bank’s next move.

An aggressive slew of tariffs on imported goods is denting consumer confidence, with households bracing for a potential spike in consumer prices and a weakening job market. Yet the latest data show inflation decelerated in March, while the unemployment rate remained steady in April.

Fed officials have stressed in recent public comments that while uncertainty is unusually high, monetary policy is still in a good place to balance their goals of fostering maximum employment and stable prices.

“Hard data is still holding up,” said Sarah House, senior US economist for Wells Fargo. “I think we’ll also hear that uncertainty is high in this environment, and they are ready to act — or not act — as needed to try and meet both sides of their mandate.”

The Fed’s rate decision will be released at 2 p.m. Wednesday in Washington. Chair Jerome Powell will hold a post-meeting press conference 30 minutes later. Investors will listen closely for whether Powell repeats, as he has multiple times, that policymakers are in “no hurry” to adjust rates.

Pricing in futures markets currently points to a quarter-point rate cut at the Fed’s July 29-30 meeting, and for two or three more by the end of the year. Economists surveyed by Bloomberg anticipate only two cuts, beginning in September.

Still, Fed officials may again lean into signs of a “solid” labor market to justify their wait-and-see mode, after hiring exceeded expectations in April payrolls and unemployment remained at 4.2%.

Policymakers are also likely to repeat that uncertainty around their economic outlook has increased, or remains high.

Powell is also almost certain to face questions about the regular pressure and personal insults being leveled at him by President Donald Trump, and possibly about the president’s threats to fire him. Trump has backed away from the latter, repeating in an interview taped last week and aired on Sunday that he had no intention of seeking to dismiss the chair. 

He did, however, call Powell a “total stiff” over the Fed chief’s reluctance to cut rates, piling on the “major loser” barb he launched in April.

Powell will likely seek to avoid any response that antagonizes the president and emphasize the Fed’s independence from elected officials in monetary policy deliberations.