STORY HIGHLIGHTS:

• Fed to announce decision on interest rates Wednesday at 2 p.m. ET

• Rates expected to remain in the 4.25%–4.5% range

• Odds of rate cut this week: Only 4%

• Inflation in June: 2.7% — above Fed’s 2% target

• Next potential cut likely at the Sept. 16–17 meeting

• Trump: “Interest rates have to come down”

• Powell: “Fed decisions are based on data, not politics”

In the latest display of tension between the White House and the nation’s central bank, President Donald Trump met privately last week with Federal Reserve Chair Jerome Powell, reiterating what he described as a “very simple” request: “Interest rates have to come down.”

The request comes at a time when the Federal Reserve is widely expected to keep interest rates unchanged during its upcoming announcement on Wednesday, July 30 at 2 p.m. ET. A press conference with Powell will follow at 2:30 p.m., where he will address the state of the economy and respond to questions about the Fed’s monetary policy stance.

Despite repeated pressure from the president and top administration officials, economists believe the Fed is unlikely to budge just yet. FactSet data puts the probability of the Fed holding rates steady at a striking 96%, signaling that Powell and his team remain committed to a cautious approach amid mixed economic signals.

The central bank has kept its benchmark interest rate in the 4.25% to 4.5% range since December 2024. That decision, made before Trump’s second-term inauguration in January, was aimed at keeping inflation under control while providing enough support for continued economic growth.

However, Trump has publicly expressed frustration at what he views as unnecessary hesitation. He has criticized Powell for months over what he calls the Fed’s “overly cautious” handling of interest rates. The President has argued that a rate cut would stimulate the economy, strengthen investment, and help American businesses thrive.

In recent remarks, Trump pointed to more aggressive monetary actions abroad:

“Look at what the European Central Bank and the Bank of England are doing — they’re cutting rates. We’re just sitting on our hands.”

Yet, Powell and other policymakers appear unfazed by the political messaging. They continue to assert that interest rate decisions are determined not by politics, but by economic fundamentals.

“Our decisions are guided solely by data and our dual mandate: maximum employment and stable prices,” Powell has stated repeatedly in past briefings, emphasizing the independence of the Federal Reserve.

Adding to the strain, senior Trump administration officials have floated criticism of Powell’s handling of a Federal Reserve building renovation, suggesting it could be used as justification for his removal. However, any such move would likely spark legal and political challenges, as the Fed chair has fixed-term protection under federal law.

Meanwhile, inflation is proving to be more persistent than expected. The Consumer Price Index rose to 2.7% in June, surpassing the Fed’s 2% target and underscoring concerns that recent tariffs introduced by the Trump administration may be contributing to rising consumer prices. This puts the Fed in a tough spot: cut rates and risk stoking inflation, or stay the course and risk slowing economic momentum.

According to Ryan Sweet, chief U.S. economist at Oxford Economics:

“With the labor market holding up and the impact of tariffs on inflation starting to rear its ugly head, the Federal Reserve has plenty of ammunition to justify keeping interest rates unchanged at the July meeting.”

Some internal debate does exist within the Federal Open Market Committee (FOMC), the 12-member body responsible for setting interest rates. At least two members — Christopher Waller and Michelle Bowman — have recently signaled that a rate cut may be warranted soon.

If both dissent, it would mark the highest number of dissenting votes in a Fed rate decision since 1993. Still, the majority view remains in favor of patience. As Sweet noted:

“Dissents are normal and even healthy. They show the Fed isn’t falling into groupthink.”

The broader economic picture supports that caution. Job growth in June exceeded expectations, and second-quarter GDP, though slowing, is still projected to expand by 1.8%, compared to 2.8% in 2024. While not stellar, the figures don’t yet paint a picture of crisis.

“Policymakers remain cautious, navigating persistent inflationary risks tied to trade policy along with cooling labor market conditions and growing political pressure from the administration to accelerate rate cuts,” said Gregory Daco, Chief Economist at EY-Parthenon.

The Fed’s primary tools—interest rate hikes and cuts—are designed to adjust the speed of economic activity. Raising rates tends to slow spending and investment by making borrowing more expensive, helping contain inflation. Conversely, lowering rates can stimulate the economy but may also fuel price increases if not timed correctly.

Looking ahead, economists believe the Fed is far more likely to deliver a cut during its September 16–17 meeting, as that would give more time to assess inflationary trends and job market shifts. FactSet estimates a 63% probability of a rate cut in September, likely by 0.25 percentage points, bringing the target range to 4% to 4.25%.

“With no imminent need to act, the Fed will likely wait until September to deliver the next 25 basis point rate cut,” Daco said, adding that further cuts could follow in 2026 if economic conditions deteriorate further.

As Powell prepares to face reporters on Wednesday, many will be watching not just for his view on inflation and growth, but also his response to escalating pressure from the Trump administration. While Powell’s current term extends through May 2026, speculation has grown that the White House may move to name a successor early to shape the Fed’s direction in the final years of Trump’s presidency.

Even so, Powell has shown little sign of yielding.

“The odds are that [Powell] sticks with his mantra that it doesn’t impact monetary policy and he isn’t resigning, while dodging questions about a shadow Fed chair,” Sweet observed.

As the Fed walks a tightrope between economic data and political interference, Wednesday’s decision—and Powell’s words—will offer a crucial signal on how the central bank plans to navigate an increasingly complex landscape.