- The Federal Reserve voted to maintain its benchmark interest rate after three cuts to end 2024.
- Fed Chairman Jerome Powell declined to address President Donald Trump's comments about interest rates.
- Trump has threatened to fire Powell but experts say the president doesn't have that authority.
As was widely expected, the Federal Reserve’s Open Market Committee voted to leave the monetary body’s benchmark interest rate unchanged at its January meeting, a pause that follows three straight interest rate reductions to close out 2024.
The Fed’s intra-bank overnight lending rate remains in the 4.25% to 4.5% range.
Fed Chairman Jerome Powell said a wait-and-see position was appropriate for the moment, pointing to positive U.S. economic indicators including GDP growth in the 2% to 2.5% range, a jobs market and unemployment rate that’s held relatively stable over the past six months and inflation that continues to move, albeit erratically, toward the Fed’s 2% goal.
At a press conference Wednesday after the Fed’s two-day meeting, Powell fielded numerous questions about what impacts policy changes promised by President Donald Trump would have on the economy. But the Fed leader noted the body makes its policy decisions based on economic data and doesn’t postulate on the shifting winds of political dialogue.
“I think where the committee is is very much in the mode of waiting to see what policies are enacted,” Powell said. “We don’t know what will happen with tariffs, with immigration, with fiscal policy and with regulatory policy. We need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”
Powell also noted that it’s familiar territory for the Fed to be watching for economic impacts following a federal leadership turnover and accompanying changes in policy direction.
“This is no different than any other set of policy changes at the beginning of a new administration,” Powell said.
What Powell said about Trump’s interest rate promise
Powell also declined to respond to a reporter’s question about a Trump comment last week suggesting the president would “demand” an interest rate reduction.
“I’m not going to have any response or comment whatsoever on what the president said,” Powell said. “It’s not appropriate for me to do so.”
In a remote address to the World Economic Forum in Switzerland last week, Trump revisited his displeasure with the policy direction of the U.S. Federal Reserve that surfaced during his first term in spite of having appointed the current leader of the monetary body.
Trump suggested that high oil prices are contributing to the protracted Russia-Ukraine war and urged Saudi Arabia and OPEC members to bring down the price of petroleum in his address to world leaders gathered in the city of Davos for the conference.
Trump said once oil prices came down he would insist on an interest rate cut by the U.S. central bank, though did not call out the Fed by name.
“I’ll demand that interest rates drop immediately,” Trump said. “And likewise, they should be dropping all over the world. Interest rates should follow us all over.”
During a December interview on NBC’s “Meet the Press,” Trump softened his previous position on Powell, backing off earlier threats to fire the chairman.
When asked by moderator Kristen Welker about whether he has plans to ask or order Powell to step down from his chairmanship, which runs through 2026, Trump said, “I don’t.”
“No, I don’t think so. I don’t see it,” Trump said. “But, I don’t — I think if I told him to, he would. But if I asked him to, he probably wouldn’t. But if I told him to, he would.”
Can Trump fire Powell?
Powell, a Republican and former private equity executive, joined the Federal Reserve in 2012, ascended to the chairmanship in 2018 via Trump’s appointment. President Joe Biden renewed Powell’s term in 2022, which runs through 2026.
While Trump has, at times, pilloried Powell and some of the Fed’s policy decisions, experts generally agree that the U.S. president does not have the power to order personnel changes at the agency without cause and the courts have previously ruled that a difference of opinion on policy matters does not rise to that level.
Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. Federal lawmakers also structured the Fed to ensure that its monetary policy decisions focus on achieving that two-part mission outside the impacts of political pressures.
To that end, members of the Fed’s Board of Governors are appointed to staggered 14-year terms, and the board chairperson is appointed to a four-year term. Also, elected officials and members of the president’s administration are not allowed to serve on the board.