• The Federal Reserve maintains interest rates for the seventh consecutive meeting, defying public calls for cuts from former President Trump.
  • Markets price in a 97% chance of no change, with inflation risks and tariff policy uncertainties driving the Fed's cautious stance.
  • Powell reaffirms central bank independence as Trump escalates criticism, including unsubstantiated claims about Fed building costs.

No Surprises From the Fed

Jerome Powell kept the federal funds rate unchanged at 5.25%-5.50% in Wednesday's decision, aligning perfectly with market expectations. The move comes despite increasingly vocal demands from Donald Trump, who visited Fed headquarters last week urging immediate cuts to "supercharge" the economy and reduce debt servicing costs.

"We don't see persuasive evidence that inflation is sustainably moving toward 2%," a senior Fed official told reporters on condition of anonymity, citing recent CPI volatility and potential tariff impacts. The central bank's dot plot still signals two possible 25-basis-point reductions in 2025, but officials emphasized these remain data-dependent.

Political Pressure Versus Policy Reality

Trump's latest intervention marks an escalation in his long-running campaign against Powell, whom he appointed in 2018. "They're paying billions extra on interest because Powell refuses to act," the former president claimed in a Truth Social post hours before the decision, incorrectly suggesting the Fed controls Treasury debt costs.

Market reaction was muted, with 10-year Treasury yields holding near 4.30%. "This was the most telegraphed non-move in Fed history," said one Wall Street trader, noting Fed funds futures had priced in near-certainty of unchanged policy. The Fed's statement removed prior language about "additional policy firming," a subtle dovish tilt that analysts say preserves optionality for later cuts.

The Renovation Side Show

Separately, Trump renewed attacks on the Fed's $2.5 billion headquarters renovation - a project approved in 2012. "Powell's palace makes Biden's border wall look cheap," he quipped, despite federal records showing 85% of cost increases stemmed from post-pandemic construction inflation and security upgrades mandated by Congress.

Fed staff declined to comment on the remarks but noted the consolidation from leased offices would save $300 million annually by 2027. Powell has consistently avoided engaging with political critiques, telling reporters Wednesday: "We focus exclusively on our dual mandate objectives."

Correction: An earlier version misstated the projected annual savings from the Fed's headquarters consolidation. The correct figure is $300 million.