Why the Fed Left Rates Unchanged Despite Pressure from Trump
In its first meeting since President Trump took office, the Federal Reserve announced today that it was holding interest rates steady, pushing stocks lower across the board.

The Federal Reserve has decided to hold interest rates steady in its January 2025 policy meeting, resisting calls from President Donald Trump to loosen monetary policy. The move came after three consecutive rate cuts dating back to September 2024, signaling the central bank’s commitment to manage stubborn inflation and support a stable labor market.
Investors had widely predicted this outcome, given the Fed’s prior hints at entering a “wait and see” phase. The target range for the federal funds rate remains at 4.25% to 4.50%, a level that most officials still consider restrictive enough to curb elevated inflation.
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Trump’s Pressure for Lower Rates
President Trump’s remarks ahead of the decision created a high-stakes backdrop. Last week, he reiterated his wish for immediate rate cuts, claiming such a move would strengthen the US economy and help control prices. Still, Fed Chair Jerome Powell offered no direct response. Instead, he reiterated the institution’s independence and long-term view.
While the president’s stance poses a stark contrast to the Fed’s measured approach, policymakers continue to focus on fundamentals. The central bank has long stressed the need to balance job growth with price stability. Recent statements from the Fed indicate lingering concerns about inflation, which, though lower than 2022’s peak, remains above the Fed’s 2% target.
Economic Fundamentals
Economic indicators suggest steady expansion fueled by consumer spending and a resilient labor market.
The Fed’s official statement confirmed this optimism, stating:
“The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
Policymakers dropped previous language that inflation had “made progress” toward the 2% goal, implying they see less improvement in prices.
The Fed’s cautious stance stems partly from uncertainty surrounding new or proposed White House policies, including tariffs and deregulation efforts. These measures could raise production costs and push prices higher, thus complicating the Fed’s struggle to bring inflation in line with its target.
Despite the challenge of rising prices, the economy has managed to grow at a solid pace. The labor market also remains healthy, which reduces the urgency to lower rates. The Fed clearly signaled that it wants more concrete proof of disinflation before hitting the policy accelerator again.
Powell’s Response to White House Comments
During the post-meeting press conference, Powell was asked about the White House’s recent calls for lower interest rates. He maintained the Fed’s independence by declining to comment on the president’s remarks. Instead, Powell emphasized the need for further data on inflation and employment trends.
Although the relationship between Trump and the Fed has been contentious, Powell assured Americans that the central bank remains focused on its mandate. Powell also noted that he has not been in contact with the President since his public calls for lower rates.
These remarks highlight the Fed’s insistence on making policy decisions free from political interference.
FOMC Press Conference, January 29, 2025
Source: Federal Reserve YouTube
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Market Reaction
Wall Street reacted modestly to the Fed’s decision. Stocks drifted lower across the board, with the S&P 500 Index (SPX) declining 0.47%, the Dow Jones Industrial Average (DJI) slipping 0.31%, and the NASDAQ Composite (IXIC) dipping 0.51%. While the Fed’s pause was expected, market participants had hoped for more bullish guidance on potential future cuts.
Technology shares also lost ground. Nvidia (NASDAQ: NVDA) dropped 4.03%, extending a recent slide that began following the release of China’s groundbreaking AI startup DeepSeek. Meanwhile, other Big Tech names such as Meta (NASDAQ: META) and Microsoft (NASDAQ: MSFT) wavered ahead of upcoming earnings releases. Microsoft fell 1.09%, while Meta battled back to close up 0.32%. Tesla (NASDAQ: TSLA), having captured investor attention with its electric-vehicle innovations, also saw its stock trade 2.26% lower in the wake of the rate-hold announcement.
Financial stocks felt the impact of the Fed’s pause as well. JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) edged down 0.21% and 0.19%, respectively. Regional banks—tracked by the SPDR S&P Regional Banking ETF (NYSE Arca: KRE) dipped 0.11%, while the SPDR S&P Bank ETF (NYSE Arca: KBE) declined 0.19%. In a rising-rate environment, banks typically benefit from larger lending spreads, yet the uncertain path ahead kept enthusiasm in check.
Looking Ahead
The Fed’s decision to refrain from another rate cut suggests officials see enough momentum in the labor market and the broader economy to justify caution. While no immediate moves are on the table, many economists believe additional cuts could come later this year if inflation shows a more decisive downward trend or if growth stumbles.
Market watchers will pay close attention to upcoming economic data, such as monthly inflation metrics and consumer spending reports. These figures may determine whether the Fed decides to trim borrowing costs in future meetings or maintain the current rate. Either way, the central bank has emphasized it will remain vigilant and data-driven.
In the meantime, corporate leaders, investors, and the public will continue monitoring any White House statements that might exert pressure on Fed policy. For now, the central bank is content to wait for more evidence that inflation is returning to its target before offering further rate cuts—even if that stance puts it at odds with the president’s preferences.
By keeping rates unchanged, the Fed underscored its dual mandate focus: promote maximum employment and ensure price stability. Officials appear willing to endure political pressures as they navigate a complicated economic landscape. For them, the priority is clear—only concrete improvements in inflation or fresh signs of weakness in the job market will prompt further action.
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