Federal Reserve likely to hold interest rates steady despite Trump pressure

The Federal Reserve is expected to leave interest rates unchanged at its meeting on Wednesday, even as President Trump intensifies his campaign to push the central bank into lowering the cost of borrowing.

Hours ahead of the meeting, Mr. Trump lauded the U.S. economy’s return to positive growth in the second quarter. The Commerce Department said the nation’s gross domestic product — the value of services produced across the economy — rose at a seasonally and inflation-adjusted 3% annual rate in the second quarter. That exceeded the 2.3% growth that Wall Street predicted.

Mr. Trump said on Truth Social that the positive economic news is a strong sign that interest rates should be cut. Typically, the Federal Reserve raises rates to avoid a recession because it limits the amount of money chasing goods and services. The Fed has also argued that it needs to keep some powder dry in case Mr. Trump’s tariffs cause inflation.

“2Q GDP Just out 3%, way better than expected!” Mr. Trump wrote on Truth Social, saying Fed Chairman Jerome Powell “must now lower the rate.”

“No inflation! Let people buy and refinance their homes!” Mr. Trump wrote.

The Truth Social Post is part of an unrelenting campaign of attacks on Mr. Powell by the president. Mr. Trump has even gone so far as to give Mr. Powell a series of disparaging nicknames, including “Too Late” to underscore the president’s frustration that the bank has been too slow to slash rates.

However, the torrent of criticism hasn’t moved Mr. Powell to take much action.

Mr. Trump has suggested the Fed cut the benchmark rate from its 4.25% to 4.50% range to as low as 1%, a request the central bank doesn’t seem to want to honor.

However, Fed Gov. Christopher Waller and Vice Chair for Supervision Michelle Bowman have said they support lowering rates at this meeting and could issue dissents if the Fed holds steady for the fifth straight time since December.

If the Fed punts on a rate reduction at this meeting, it could cut them in September, which would give the board more time to assess the impact of Mr. Trump’s sweeping tariffs.

Economists who predict a rate cut at the September meeting are forecasting a 0.25 percentage point reduction, which would take the federal funds rate down to a range of 4% to 4.25%.

Still, Mr. Trump hasn’t let up on Mr. Powell, whom he appointed as Fed chief during his first administration. The president has already floated the idea of replacing him but probably can’t do so until Mr. Powell’s term expires in May.

To up the pressure, Mr. Trump has taken aim at the Fed chair’s handling of a building renovation at its headquarters, saying cost overruns and mismanagement could be grounds for firing Mr. Powell. Last week, Mr. Trump toured the renovation project and used the opportunity to badger Mr. Powell into reducing rates.

When asked what Mr. Powell could do to appease him with the burgeoning budget of the headquarters renovation, Mr. Trump fired back that he could lower interest rates.

In making his case for lowering rates, Mr. Trump has pointed to rate cuts this year by the European Central Bank and the Bank of England while noting that U.S. inflation in 2025 has remained relatively low.

However, the Consumer Price Index — a key gauge for tracking inflation — in June rose to an annualized rate of 2.7%, well above the Fed’s 2% annual target and a sign that tariffs could be pushing some prices higher.