The Fed confirms rates at 4.5% and ignores Trump: no immediate cuts, uphill inflation and institutional independence at the center of the strategy
The Federal Reserve left the rates unchanged at 4.5% nothing surprising, someone would say, but behind the “nothing” there is a much more incisive message, which will disappoint the expectations of Donald Trump. It is no coincidence that the president called Jerome Powell a “stupid” by adding that he himself would have been an “excellent president of the central bank” a clash destined to last long considered that the mandate to the Fed expires in May 2026. At this point the banker became in all respects the most stubborn opponent of the White House.
It is not even excluded that the clash can rise to the level since the rates are destined to remain high and there will be few and minimal entities. The projections changed, but not in the direction that Trump would have liked. The number of members of the board that provides for a 0.25% mini-taglio in autumn has increased, while the front that asks for a more expansive policy is crumbled. An “immediate” cut looks like light years away, in spite of the shouts of help from the White House. The expectations of rapid loosening have gone out, replaced by a more reflective and prudent posture. The Fed clarified that any future reduction will be linked exclusively to data and not to external pressures.
Economic growth is not in crisis, but even inflation is not under control. Inflation estimates for 2025 have increased from 2.7% to 3%. A clear sign that the fight against inflation is far from won. But the Fed, in its reflection, is marking a clear difference compared to those who believe that the remedy for all economic evils are simply lower rates and a more accommodating policy. Powell and the Fed Committee are not inclined to lower rates only to answer political demand, but rather to answer what numbers and data suggest. The decision not to lower the rates clearly is, after all, also an act of defense of the institutional independence of the central bank.
In a context in which the Fed seems to have embraced a longer and more prudent line, Trump’s efforts to influence monetary policy appear destined to remain unsuccessful. Unless a real turning point in economic data, the path traced by the Fed will remain that of prudence, doing well not to give in to the temptation to make easy concessions.
