The Fed refuses to yield to Trump's pressure and keeps rates at around 4.50%.

WashingtonThe Federal Reserve (Fed, the central bank of the United States) is refusing to give in to pressure from Donald Trump and is keeping interest rates at around 4.50%. The escalation of the trade war, the president's subsequent reversals, and the fall in GDP during the first quarter of his term have contributed to the Fed keeping the rate frozen. In the press conference, Fed Chairman Jerome Powell warned that if they observe a "significant deterioration" in the labor market, he would try to "be able to support it." Powell added: "Hopefully, this will not also coincide with a time when inflation gets much worse."

The Federal Reserve meeting comes after Trump hinted at the possibility of dismissing its chairman, Jerome Powell. Although the US president later publicly stated that he did not plan to do so, he did state that Powell was not doing a "good job" because he had not cut interest rates during his first months in office, as Trump had demanded.

"You're not supposed to criticize the Fed, you're supposed to let them do their job, but I know a lot more about interest rates than he does," the president said the night before the quarterly GDP report for 2025 was released. It was the largest quarterly drop ever.

The poor GDP performance during Trump's first three months in office – caused in part by his trade war – is one of the other elements that the Fed was supposed to consider. The 0.3% year-on-year fall in GDP It reawakened the ghosts of recession that JP Morgan and other US companies had already proclaimed when the Republican announced reciprocal tariffs in early April.

Tariffs and inflation

The Fed's decision comes after Treasury Secretary Scott Bessent announced on Monday that he would meet with a Chinese delegation in Switzerland to begin addressing the trade situation. Even so, as the US central bank announced its decision to keep rates frozen, Trump told reporters that he would "not" lower tariffs to get China to the negotiating table.

Furthermore, despite the fact that annual inflation slowed in March, economists expect the tariffs to ultimately translate into higher prices. Some analysts also warned of a weakening dollar as a result of the protectionist measures.