In what is one of the most anticipated meetings of the year, the Federal Reserve has opted to leave interest rates unchanged at 4.25% to 4.50% for May 2025. Indeed, the decision comes in clear defiance of US President Donald Trump’s preferences for the central bank, which led to increased opposition between him and Fed Chair Jerome Powell.
The decision comes amid increased economic uncertainty derived from the United States’ America-First tariff plan unveiling in early April. Subsequently, the Fed has opted to remain committed to a wait-and-see approach despite promising job data coming to the forefront last month.
BREAKING: 🇺🇸 Federal Reserve leaves interest rates unchanged, remains at 4.25% – 4.50%.
— Watcher.Guru (@WatcherGuru) May 7, 2025
Also Read: US President Trump Calls for Fed Chair to Lower Interest Rates
Federal Reserve Defies Trump’s Wishes, Keeps Interest Rates Unchanged
Over the last two months, the standoff between Fed Chair Jerome Powell and US President Donald Trump has been a vital story. In late April, the president was reportedly exploring whether he had the power to fire the chairman from his position. That turn of events saw the market plummet amid increased economic uncertainty.
Trump would walk back the statement, ensuring he would not fire Powell. Yet, the warning was clearly given, and his hopes for the central bank’s decision were clear. Now, it is clear they are not living and dying by those wishes, as the Federal Reserve has decided to leave interest rates unchanged in May 2025.
Also Read: US Dollar Future in Crisis as Trump Might Fire Fed Chair Powell
The rate remains at 4.25% to 4.5% despite pressure from the Oval Office. Indeed, they have remained committed to observing the continued effects of the administration’s ‘Liberation Day’ tariff plan. There was a chance they could cut rates on the heels of job growth being reported in April.
The data showed that the tariff plan had yet to impact hiring, as some feared. Still, Powell has remained concerned that the import tax increase would cause a “stagflation” effect. That takes place when inflation rises and the economy slows.
This decision gives the Fed more time to assess the impact of the tariffs on consumer sentiment and behavior. Specifically, some experts have projected that the true impact on the economy wouldn’t be felt till May concludes. If that is true, it should only inform their decision on interest rates in June.