David Edwards
President Donald Trump has called for the Federal Reserve to swiftly lower interest rates, warning that U.S. tariffs are already affecting the economy.
“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy,” Trump posted on Truth Social. “Do the right thing. April 2nd is Liberation Day in America!!!”
Federal Reserve Holds Rates Steady but Lowers Growth Outlook
The Federal Open Market Committee (FOMC) opted to maintain its benchmark interest rate at 4.25%-4.5% for the second consecutive meeting. However, economic projections have weakened. The Fed now forecasts 1.7% GDP growth, down from 2.1%, while inflation expectations have climbed to 2.8% from the previous 2.5%. These shifts heighten concerns about stagflation, a combination of slow economic growth and rising prices.
Inflation and Economic Risks Loom
The Fed acknowledged growing uncertainty, stating that risks to the economic outlook have intensified. While policymakers continue monitoring inflation and growth trends, they have not yet moved to reduce rates.
Inflationary pressures are mounting as Trump’s trade policies begin to impact businesses. Tariffs on key trading partners are expected to increase costs for companies and consumers alike. Fed Chair Jerome Powell addressed these concerns, stating:
“Inflation has started to move up now. We think partly in response to tariffs, and there may be a delay in further progress over the course of this year.”
He also emphasized that businesses and households are experiencing “rising uncertainty and significant concerns about downside risks.”
Despite inflation worries, the Fed still anticipates two rate cuts before the end of 2025. According to the central bank’s dot plot, officials project a 3.9% interest rate by year-end, implying a target range of 3.75%-4%. However, internal divisions persist: while only one official opposed rate cuts in January, four FOMC members now support maintaining current rates for the remainder of the year.
