The Federal Reserve announced on Wednesday that it would keep interest rates stable, resisting President Donald J. Trump’s calls for an additional reduction. This decision follows a pattern where the Fed paused its rate cuts after implementing three consecutive reductions toward the end of 2024. The current interest rate remains between 4.25 percent and 4.5 percent.
Inflation has significantly dropped from its peak of over nine percent in June 2022 under former President Joe Biden. However, the inflation rate remains slightly elevated, just above the Fed’s two percent target. Despite concerns about a potential acceleration in price increases late last year, stock prices have largely stabilized.
In a post-rate announcement statement, the Federal Reserve pointed to a resurgent jobs market as a key reason for the pause—suggesting the central bank is concerned that a swift economic recovery under President Trump combined with too steep of rate cuts could increase inflationary pressures. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid,” the January Fed statement reads, adding: “Inflation remains somewhat elevated.”
Additionally, the Fed notes that the U.S. economy “has continued to expand at a solid pace.”
Trump recently reiterated his stance on lowering interest rates. During a virtual address to the World Economic Forum (WEF) in Davos, he linked this to oil prices, suggesting that reduced oil costs could permit the Fed to ease its combating of inflation, thus justifying rate cuts. Trump also mentioned his intention to engage Saudi Arabia and OPEC in reducing oil prices.
