Federal Reserve keeps interest rates steady again, remains unbowed in face of Trump pressure

The Federal Reserve kept its policy rate steady at 3.5% to 3.75% Wednesday, once again refusing to bow to pressure from President Donald Trump to lower interest rates.

The move was not exactly out of the blue – recent economic indicators, from the slashing of GDP growth, as well as inflation data, have fueled speculation that the Fed would continue its conservative approach to interest rates.

In its statement the Fed pointed to job gains that have remained low, and an unemployment rate has been little changed in recent months. The central bank also noted that inflation remains "somewhat elevated," and pointed to the uncertain implications for the U.S. economy from the war in the Middle East.

The Fed was broadly expected to remain on hold with regard to the interest rate, according to Naomi Fink, chief global strategist at Amova Asset Management, in a note released Tuesday. “The most important point is that with the supply shocks related to the Iran war, the bar for cuts has risen,” she added.

Lon Erickson, portfolio manager at Thornburg Investment Management, thinks that the ongoing tension between the Fed’s inflation and employment mandates has become harder to assess amid the Iran conflict and the resulting rise in oil prices. "The only material change to the statement was to acknowledge this increased difficulty," he said, in a statement.

For Daniel Siluk, head of global short duration & liquidity and portfolio manager at Janus Henderson Investors, the Fed's hold was fully expected, but the tone came through more cautiously balanced than hawkish. "The statement explicitly notes that job gains remain low, inflation is 'somewhat elevated,' and uncertainty from Middle East developments clouds the outlook, marking a clearer recognition of two sided risks," he said, in a statement.

There was more inflation data to digest just hours before the Fed released its interest rate statement. Early Wednesday, the Bureau of Labor Statistics put out the latest Producer Price Index data. The PPI for final demand increased 0.7% in February, up from 0.5% in January, and well above forecasts of a 0.3% increase, according to Trading Economics.

Sonu Varghese, chief macro strategist at wealth advisory firm Carson Group, thinks that recent inflation data make the chance of Fed rate cuts in 2026 highly unlikely. "February producer price index data confirms that the Fed had an inflation problem even before the Middle East crisis,” he said, in a note released Wednesday morning. “The data was hotter than expected across the board, and we're likely to see some ugly inflation prints over the next few months if the crisis persists.”

“The chance of any rate cuts this year are close to zero, unless the labor market really breaks," Varghese added.

The Federal Reserve made three consecutive rate cuts last year, and has been urged to slash rates further by Trump. Fed Chair Jerome Powell has been on the receiving end of a pressure campaign from the president. Earlier this week, during a White House meeting, Trump urged the Federal Reserve to cut interest rates "right now," according to the Wall Street Journal.

Trump has also named Federal Reserve governor Kevin Warsh to succeed Powell.

In January Powell said that he is under criminal investigation over testimony he gave to the Senate Banking Committee last year related to the renovation of historic Federal Reserve buildings. The Fed chair, whose term ends in May, has slammed the investigation as revenge over the central bank’s interest rate decisions.

Speaking during a Federal Open Market Committee press conference Wednesday, Powell said that he has no intention of leaving the Fed board until the investigation is "well and truly over." He was also asked whether he will serve as a Fed governor after his term ends and the investigation is over. "I have not made that decision yet," he saoid.