Federal Reserve holds interest rates as Trump piles on pressure

The US Federal Reserve left interest rates unchanged after its first rate-setting meeting of the year on Wednesday, resisting enormous pressure from the White House to lower rates.

A majority of members in the Fed’s federal open market committee (FOMC) voted to pause interest rate cuts after slashing rates three times in the fall. Rates currently sit at a range of 3.5% to 3.75%.

The Trump administration has put unprecedented pressure on the Fed chair, Jerome Powell, to cut rates, with Donald Trump launching personal attacks on Powell and the justice department opening a criminal investigation into his handling of the refurbishment of the central bank’s offices.

The FOMC has 12 voting members and meets just eight times a year to set interest rates. The stakes of each meeting have been high during Trump’s second term. Though economists say that the Fed’s independence, as the US central bank, is key for economic stability, the president has unabashedly tried to bend the Fed to his economic agenda.

Cutting interest rates can spur short-term economic activity, though at the risk of pushing up prices in the long term. But Trump has claimed that the Fed not lowering interest rates costs the US economy “hundreds of billions of dollars”.

Fed officials have resisted these calls. In December, at the last FOMC meeting, Powell implied the Fed would be pausing cuts for the time being. “We’re well positioned to wait and see how the economy evolves from here,” he said. After the Fed meeting, Trump called Powell “stiff” and said that the rate drop “could have been doubled”.

The full extent of Trump’s anger would not be seen until 11 January, when Powell – whose term as chair is up in May – announced he was under criminal investigation.

The investigation is focused on congressional testimony that Powell gave last summer on renovations at the Fed headquarters, which has gone over budget. Trump alleges Powell committed fraud, though the Fed chair has said that the renovations were necessary safety upgrades to decades-old buildings.

In a recorded statement, what many said was a remarkable defiance of Trump’s bullying, Powell called the investigation a “pretext”.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation.”

The investigation remains ongoing, despite swift backlash from business leaders and some Republican lawmakers.

Powell is set to speak at the regularly scheduled press conference that takes place after FOMC meetings. This will be the first time Powell has fielded questions since being targeted by a justice department investigation.