FILE-Federal Reserve Chair Jerome Powell delivers remarks during the Division of International Finance 7th Anniversary Conference at the Fed on June 02, 2025 in Washington, D.C. (Photo by Chip Somodevilla/Getty Images)
The Federal Reserve is expected to leave its short-term interest rate the same on Wednesday for the fifth consecutive meeting.
According to the Associated Press, the agency is mulling its next steps, and economists expect that two members of the Federal Reserve’s governing board could dissent on Wednesday in support of cutting rates.
Trump and Federal Reserve divided on cutting interest rates
Dig deeper:
President Donald Trump believes that because the nation’s economy is doing well, the Fed Reserve should cut interest rates. However, Federal Reserve officials contend that a stable economy means interest rates should stay relatively high, to avoid overheating and a surge in inflation, the Associated Press reported.
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Trump argues that the Federal Reserve and Chair Jerome Powell are costing Americans billions of dollars in interest payments by not lowering borrowing costs. According to the AP, Federal Reserve officials don’t believe they should reduce rates the government pays on Treasury notes and bonds.
The president also claims there’s “no inflation” and the Federal Reserve should lower its short-term interest rate, which is currently at 4.3%. According to the AP, the Federal Reserve’s rate occasionally impacts on longer-term borrowing costs for mortgages, car loans, and credit cards.
Citing economists, the AP noted that the Federal Reserve is projected to reduce its key interest rate by a quarter-point in September, instead of July, which is likely to have a limited effect on the economy.
Where do things stand with inflation in the U.S.?
Big picture view:
The Associated Press reported that inflation has dropped significantly, resulting in the Federal Reserve suggesting that it will cut interest rates by as much as a half-percentage point in 2025.
RELATED: Trump visiting Federal Reserve amid push for Powell to cut interest rates
But it has picked up slightly in the last two months and many policymakers, including Federal Reserve Chair Jerome Powell, still want to ensure that tariffs aren’t going to boost inflation much higher before they make a move.
In June, inflation jumped to 2.7% from 2.4% in May, the government told the AP in early July. Core prices, which exclude the volatile food and energy categories, increased to 2.9% from 2.8%.
The Source: Information for this story was provided by the Associated Press, which cites analysis from economists on potential interest rate cuts. This story was reported from Washington, D.C.
