Fed remains at high interest rates – Trump calls for urgent interest rate cuts!

Fed remains at high interest rates – Trump calls for urgent interest rate cuts!

On June 18, 2025, the US Federal Reserve (Fed) decided to keep the key interest rate stable in the range of 4.25 to 4.5 percent. The decision follows repeated urging from former President Donald Trump, who has called for interest rates to be cut to stimulate economic growth. The Fed currently sees no urgent need to cut interest rates, especially given the robust labor market situation and the stable inflation rate. According to zvw.de, the Fed expects lower economic growth of just 1.4 percent for 2023, slightly below the previously forecast figure of 1.7 percent.

Uncertainty about future economic developments is heightened by both Trump's aggressive trade tariffs on imported goods and geopolitical tensions, particularly the conflict between Iran and Israel. These factors could have serious impacts on the US economy, according to the Fed's assessment. Inflation is forecast to rise 3.0 percent this year, up from the previous estimate of 2.7 percent.

Inflation and interest rate policy

Consumer prices rose by 2.4 percent in May compared to the same month last year. These developments lead the Fed to act cautiously, especially since high interest rates are intended to dampen demand and thus control inflation. Fed Chairman Jerome Powell emphasized in a statement that the Fed must first wait and see how the economic situation develops. Powell, who was nominated by Trump to be Fed chief in 2017, does not see the former president's calls for lower interest rates as affecting the Fed's work.

Trump himself has sharply criticized the current administration's interest rate policy, claiming he knows more about interest rate policy than Powell. According to a report on kurier.at, the Fed plans to adjust its key interest rate to 3.9 percent in 2025, suggesting two small rate hikes during the year. Experts believe that the Fed could not adjust interest rates until fall 2025 at the earliest if the economic situation requires it.

The role of Trump and geopolitical uncertainties

Trump's aggressive tariff policies, which he has used in the past to strengthen the US economy, could now prove potentially damaging. Analysts warn that these measures could lead to higher inflation, slower economic growth and ultimately rising unemployment. Trump accuses the current administration of having damaged the US economy through its economic policies, as it surprisingly contracted in the first quarter of 2025.

Overall, the situation remains tense and the Fed faces a number of challenges. It remains to be seen whether the central bank will respond to Trump's demands. In any case, the next steps in interest rate policy will be crucial for the future economic development of the United States.