Fed Holds Firm at 4.25–4.5%: Powell Defies Trump Pressure, Holds Rates Amid Inflation Jitters

In a landmark decision on July 30, 2025, the U.S. Federal Reserve, led by Chair Jerome Powell, elected to maintain the federal funds rate in the 4.25%–4.50% range for the fifth time in 2025. The move came despite intense pressure from President Donald Trump, who had repeatedly called for immediate rate cuts.

Powell reaffirmed the Fed’s independence and reiterated its commitment to a data‑driven approach. He emphasised that the central bank’s mandate centres on controlling inflation and supporting employment—not catering to political demands. His cautious stance reflects concern over rising price pressures tied to new tariffs and lingering uncertainty in economic data. 

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Economic Indicators offer a Mixed Picture 

Quarterly U.S. GDP growth reached 1.2% in the first half of 2025, spurred in part by a steep drop in imports before Trump’s tariff measures took full effect. Nonetheless, domestic demand has slowed, and underlying data remains soft. Inflation remains “somewhat elevated”—CPI rose to 2.7% in June—and the labour market continues to show strength, with unemployment steady near 4%. “I would characterise it as modestly restrictive. Inflation is running a bit above 2% as I mentioned, even excluding tariff effects, the labour market's solid, historically low,” said Jerome Powell in the press conference.

Within the Federal Open Market Committee (FOMC), dissent emerged from two governors appointed by Trump—Christopher Waller and Michelle Bowman—who favoured a 25‑basis‑point rate cut. This marks the first time that board governors formally opposed a policy decision in tandem. Powell also cited that the unemployment and financial conditions are in an “accommodative” position in the U.S. economy.

Market response was swift. The likelihood of a September rate cut dropped sharply—from around 65% at the start of the week to below 50% after Powell’s comments. The S&P 500 fell about 0.12%, and Treasury yields edged higher as confidence in near‑term easing waned.

Looking ahead, the Fed highlighted that its policy choice hinges on forthcoming key data, including inflation measures for June and employment figures for July. Powell declined to offer new guidance on the September meeting, reiterating that further decisions will be based on incoming evidence. 

Conclusion

Despite political pressure, the Federal Reserve demonstrated its commitment to a cautious, data-dependent posture by maintaining interest rates at their current level.  With inflation still above target and economic trends mixed, the central bank is prioritising long‑term stability over short‑term appeasement.