(NewsNation) — The Federal Reserve is expected to hold interest rates steady on Wednesday, as officials remain cautious amid a swirl of recent economic data.
A pause would mark the Fed’s fifth straight meeting without a rate change, despite mounting pressure from President Donald Trump to ease borrowing costs.
On Wednesday, Trump hailed a new GDP report showing the U.S. economy expanded at a surprisingly strong 3% annual rate in the second quarter and called on Fed chair Jerome Powell to cut rates.
““Too Late” MUST NOW LOWER THE RATE,” Trump wrote on Truth Social. “Let people buy, and refinance, their homes!”
While a rate cut could lead to lower borrowing costs on mortgages, auto loans and credit cards, it’s not guaranteed — and there are reasons policymakers have remained in a wait-and-see mode.
Since the Fed began hiking rates in March 2022, inflation has fallen significantly, but concerns persist, especially with Trump’s tariffs stoking new fears.
Inflation accelerated 2.7% in June from a year earlier, the fastest annual pace since February. Economists warn that Trump’s import taxes could drive prices higher for American consumers, though the full impact has yet to be felt.
If the Fed lowers interest rates now, it could fuel inflation at a time when the effects of Trump’s trade policies are starting to appear at the checkout lane.
Meanwhile, the job market has cooled, yet it’s still holding up better than many expected. The unemployment rate ticked down to 4.1% in June from 4.2% in May.
So far this year, employers have added an average of 124,000 jobs per month. That’s well below the red-hot pace from 2021 through 2023, when monthly gains averaged 400,000, but still reflects a relatively resilient labor market.
Consumer spending has slowed, but likely not enough to prompt policymakers to slash interest rates, a move that would signal an effort to stimulate growth.
Trump’s trade policy is another wildcard.
Wednesday’s interest rate announcement comes just two days before a new round of global tariffs is set to take effect. Trump said Wednesday he’s holding firm on his Aug. 1 deadline, even though several major U.S. trading partners have yet to reach deals.
That means companies importing goods from Canada, Mexico, South Korea, Brazil and other key partners could face higher tariffs within days.
