Washington DC [US], June 19: The US Federal Reserve on Wednesday announced it would keep its benchmark interest rate unchanged at 4.25 to 4.5 percent, citing steady economic growth and stable employment, despite increasing political pressure and global uncertainties, The Hill reported.
Federal Reserve officials pointed to declining inflation and persistently low unemployment as key reasons for maintaining the current rate. The unemployment rate has held steady at 4.2 percent for three consecutive months, with approximately 7 million unemployed individuals in a labour force of 170 million.
In terms of inflation, the Consumer Price Index (CPI) ticked up slightly to a 2.4 percent annual rate in May, compared to 2.3 percent in April. However, the Fed’s preferred inflation metric—the Personal Consumption Expenditures (PCE) index—slowed to a 2.1 percent increase in April, moving closer to the Fed’s 2 percent target.
While economists have raised concerns over potential inflation from President Donald Trump’s trade tariffs, which have driven the US tariff rate to its highest level in nearly a century, the data has yet to reflect any significant inflationary spike, according to the report.
President Trump has been vocal in his criticism of the Fed, calling for a return to interest rate cuts. He recently lashed out at Fed Chair Jerome Powell, calling him a “numbskull” and arguing that maintaining high rates would further increase interest costs on the national debt. This comes amid growing fiscal pressures from Republican-backed tax and spending proposals in Congress.
Despite Trump’s pressure, market analysts had largely anticipated the Fed’s decision to hold rates, given the macroeconomic stability and relatively contained inflation.
Complicating the economic outlook is the rising tension in the Middle East. Following Israeli airstrikes on Iranian nuclear facilities and the targeted assassination of Iranian officials, geopolitical instability has surged. This has driven oil prices higher, with Brent crude climbing to $76.45 per barrel on Monday, its highest level since February.
While the Fed acknowledged that such geopolitical developments could influence future decisions, the central bank reaffirmed its commitment to a data-driven approach as it navigates economic uncertainty and political headwinds.