The US Federal Reserve is expected to leave its benchmark interest rate unchanged on Wednesday, as signs of cooling inflation and stable job growth clash with renewed pressure from President Donald Trump for aggressive rate cuts.
After months of tariffs and political attacks, Trump has intensified criticism of Fed Chair Jerome Powell, accusing him of failing to act swiftly as economic risks mount.
Despite growing recession concerns, labor market indicators have remained resilient. Analysts say the Fed is likely to maintain the federal funds rate at 4.25%-4.5% as it weighs slowing inflation against geopolitical and political pressure.
US Labor Department data showed the Consumer Price Index fell 0.1% in March-the first monthly decline since May 2020-while annual inflation dropped to 2.4%, its lowest since September 2024.
The Producer Price Index declined 0.4% on a monthly basis in March-the first drop since October 2023-and rose 2.7% year-on-year. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) core index, was flat month-on-month and declined to 2.6% annually in March from 3% in February.
Gross domestic product contracted 0.3% year-on-year in the first quarter-the first contraction since early 2022-as surging imports weighed on output. The trade deficit widened 9.6% to $162 billion in March, the highest level on record.
Non-farm payrolls rose by 177,000 in April, above market estimates, while the unemployment rate held steady at 4.2%. Average hourly earnings increased 0.2%, below forecasts.
March’s non-farm payroll figure was revised downward to 185,000. Job openings, as measured by the JOLTS survey, fell to 7.2 million in March-the lowest since September 2023.
Private-sector employment rose by 62,000 last month, missing expectations. Initial jobless claims reached 241,000 in the week ending April 26-a nine-week high-and continuing claims topped 1.9 million, the most since November 2021.
TRUMP INTENSIFIES CRITICISM OF FED
Trump has repeatedly called on the Fed to cut interest rates, citing moves by European central banks and warning that delays could stall the US economy.
On April 7, he wrote on social media that now is “a PERFECT time to cut rates” but Powell “is always late.” Ten days later, he posted: “Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!'”
He added that “termination cannot come fast enough!”
Trump claimed on April 21 that Powell’s reluctance to cut rates could lead to a slowdown in the US economy.
Markets fell last week amid concerns about the Fed’s independence, before Trump softened his tone on April 23, saying he “never did” intend to remove Powell, despite calling him a “major loser” on April 21.
He renewed calls for rate cuts following the latest labor data on Friday.