Donald Trump slams Jerome Powell as US Fed holds rates, but central bank reasserts independence

Donald Trump, accused the US Fed and Chair Jerome Powell of failing to control inflation.

US Federal Reserve Chair Jerome Powell reaffirmed the central bank’s independence on Wednesday, dismissing political pressure and reiterating the Fed’s commitment to making independent, data-driven policy decisions. Shortly after, President Donald Trump lashed out at Powell, accusing him and the Fed of failing to control inflation after the central bank decided to keep interest rates unchanged.

The Federal Open Market Committee (FOMC) voted unanimously to hold the benchmark federal funds rate steady at 4.25 percent-4.5 percent, despite Trump’s recent calls for immediate cuts. Speaking at the World Economic Forum in Davos earlier this month, Trump had declared, “I’ll demand that interest rates drop immediately.”

However, Powell made it clear that the Fed does not operate based on political directives. “I’m not going to have any response or comment whatsoever on what the president said. It’s not appropriate for me to do so,” he stated during his press conference.

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Trump, while avoiding direct comments on the Fed’s rate decision, later attacked Powell, stating, “Jay Powell and the Fed failed to stop the problem they created with inflation.” The remark reflects Trump’s long-standing frustrations with Powell, whom he appointed during his first term but later clashed over monetary policy.

Powell reiterated that future monetary policy decisions would be guided by economic conditions, not political influence. “We do not need to be in a hurry to adjust our policy stance,” he said, adding that the Fed needs to see “real progress” on inflation or significant weakness in the labour market before making further changes.

Markets initially fell as investors parsed Powell’s remarks and Trump’s statements, but later trimmed losses. Bond yields ticked higher. The S&P 500 ended down 0.5 percent, the Nasdaq 100 declined 0.3 percent, and the Dow Jones Industrial Average slipped 0.3 percent.

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Powell also addressed concerns about financial stability, saying that while equity prices appear elevated, current interest rates help mitigate excessive risk-taking. “You can’t just take equity prices. You have to look at rates, too,” he said. “That represents a tightening in conditions.” Powell downplayed concerns over market movements, reiterating that the Fed remains focused on its dual mandate of price stability and maximum employment.

With Trump’s economic policies still evolving -- including proposed tariffs and potential fiscal changes, Powell emphasised that the Fed would continue to assess economic conditions before making further policy decisions. “We need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”

For now, the Fed remains committed to its 2 percent inflation target and is not rushing to alter its course. Powell’s message seemed clear that the central bank will act independently, guided by economic data.

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