Federal Reserve Keeps Interest Rates Steady Despite Trump’s Push for Cuts

By Zamal Uddin

The Federal Reserve (Fed) decided to maintain its key short-term interest rate at 4.3% during its July 2025 policy meeting, marking the fifth consecutive time this year that borrowing costs have remained unchanged. This move comes despite repeated calls from President Donald Trump urging the central bank to implement rate cuts.

Fed Holds Rates as Inflation and Tariff Impacts Remain Unclear

Chair Jerome Powell and other Federal Reserve officials stated that while the Fed might have considered cutting rates under normal circumstances, the uncertain impact of Trump’s sweeping tariffs on imports has prompted a more cautious approach. These tariffs have slightly increased the cost of goods such as appliances, furniture, and toys, leading to a modest uptick in U.S. inflation.

Powell emphasized the need to monitor economic data before making any changes to the federal funds rate:

“We aim to ensure price stability while supporting a healthy labor market. The long-term effects of tariffs must be carefully assessed before any rate adjustments,” Powell said during the post-meeting press conference.

Rare Dissent Among Fed Governors

For the first time in over three decades, two of the Fed’s Washington-based governors—Christopher Waller and Michelle Bowman—dissented, voting in favor of lowering rates. Meanwhile, nine officials, including Powell, supported keeping rates unchanged. Governor Adriana Kugler was absent from the vote.

This rare split highlights growing divisions within the central bank, possibly foreshadowing future policy debates, especially as Powell’s term ends in May 2026 and discussions about his potential replacement intensify.

Economic Growth and Trump’s Criticism

The Fed’s decision comes shortly after a report showed the U.S. economy grew at a 3% annual rate in the second quarter of 2025. President Trump cited this figure as proof of strong economic performance, reiterating his demand for lower borrowing costs.

However, economists caution that when combined with a 0.5% contraction in the first quarter, overall growth for the first half of the year stands at approximately 1.25%. Some analysts believe the Fed could cut rates as early as September if economic momentum remains weak.

Trump has also criticized Powell over a $2.5 billion renovation project at Fed headquarters, adding to tensions between the White House and the traditionally independent central bank.

Mixed Economic Signals

Federal Reserve officials remain divided over the state of the economy:

Positive View: Unemployment remains low at 4.1%, growth is steady, and inflation has risen only slightly. Holding rates steady prevents overheating and avoids worsening inflation.
Cautious View: Signs of sluggish hiring, moderate consumer spending, and 1.5% projected annual growth suggest a slowdown that could warrant a rate cut sooner rather than later.

Governor Waller voiced concerns earlier this month, stating:

“Private-sector payroll growth is near stall speed. We shouldn’t wait for the labor market to deteriorate before taking action.”

Outlook for Borrowing Costs

While the Fed has chosen not to adjust rates now, future decisions will hinge on inflation data, labor market conditions, and overall economic performance. If the economy shows continued weakness, mortgage rates, auto loans, and credit card borrowing costs could decline later this year should the Fed move toward rate cuts.