US Federal Reserve Keeps Interest Rates Unchanged Amidst Pressure from President Trump

The US Federal Reserve has kept its benchmark interest rates unchanged at 4.25-4.5 per cent, defying pressure from President Trump for immediate cuts to borrowing costs. The decision, made by the central bank's open markets committee, follows a year of steady interest rates as it assesses the impact of tariffs on consumer price inflation and the broader economy. The Fed's decision is a setback for the president, who has repeatedly called for lower interest rates to help borrowers and homeowners, citing the US economy's growth of 3 per cent annualised rate in the second quarter. The dollar, US bond yields, and stocks on the S&P 500 remained broadly unchanged after the decision, with financial markets still betting on a 60 per cent probability of an interest rate cut in September.

Key Takeaways:

• The US Federal Reserve has kept its benchmark interest rates unchanged at 4.25-4.5 per cent, defying pressure from President Trump.
• The Fed has kept rates steady throughout 2023 as it assesses the impact of tariffs on consumer price inflation and the broader economy.
• President Trump has doubled down on his call for lower interest rates to help borrowers and homeowners despite the US economy growing at a 3 per cent annualised rate in the second quarter.
• Fed Chairman Jerome Powell stated that the economy is in a solid position and monetary policy is well-positioned to respond to any downturn in growth or the jobs market.
• Two Fed board members, Christopher Waller and Michelle Bowman, favoured a 0.25 percentage point cut this month, marking the biggest divergence on the committee since 1993.
• Consumer price inflation is running at 2.7 per cent a year, above the Fed's 2 per cent target, but monthly inflation figures have not shown a major impact from higher import levies on goods prices.
• Financial markets still bet on a 60 per cent probability of an interest rate cut in September.

Statistics:

• 4.25-4.5 per cent: the unchanged benchmark interest rate range set by the US Federal Reserve.
• 2023: the year during which the Fed has kept its interest rates steady.
• 3 per cent: the annualised rate of US economic growth in the second quarter.
• 2.7 per cent: the current annual rate of consumer price inflation in the US.
• 2 per cent: the Fed's target inflation rate.
• 60 per cent: the probability of an interest rate cut in September bet by financial markets.

Sources:

• "Fed keeps rates steady as Trump ramps up pressure" by Mehreen Khan, The Financial Times.
• "US economy grows at 3 per cent annualised rate in second quarter" by The Wall Street Journal.
• "Federal Reserve" by Wikipedia.