WASHINGTON: President Donald Trump urged the US Federal Reserve on Wednesday to cut interest rates to help offset effects of his tariffs, renewing his vocal disagreement with the central bank’s decision-making. “Do the right thing,” Trump demanded in a Wednesday night post on his Truth Social site, hours after the Fed decided to hold rates steady, while reducing its growth forecast and hiking its inflation outlook.

The Federal Reserve has penciled in two rate cuts this year, but chairman Jerome Powell noted that “uncertainty today is unusually elevated” and that inflation is ticking up. Many economists have warned that the tariffs—which are being met with trade retaliation by some countries—threaten to possibly tip the US economy and others into recession.

Trump has admitted that the economy may suffer “a little disturbance” as his planned levies take hold, but that America is otherwise on the cusp of a “golden age” In Wednesday’s message, he again stressed that April 2, when he plans to enact “reciprocal tariffs” designed to reset global trade, would be a “liberation day” for the US economy.

But he wants US interest rates to come down as well. “The Fed would be MUCH better off CUTTING RATES as US Tariffs start to transition (ease!) their way into the economy,” he posted.

During his first term, Trump repeatedly expressed disagreement with the Fed’s rate decisions, urging them to be lowered to boost the economy.

The Federal Reserve paused interest rate cuts again and warned of increased economic uncertainty as it seeks to navigate an economy unnerved by President Donald Trump’s stop-start tariff rollout. Policymakers voted to hold the US central bank’s key lending rate at between 4.25 percent and 4.50 percent, the Fed announced in a statement.

They also cut their growth forecast for 2025 and hiked their inflation outlook, while still penciling in two rate cuts this year—in line with their previous forecast in December. “Uncertainty today is unusually elevated,” Fed chair Jerome Powell told reporters after the US central bank’s decision was published, adding that at least part of a recent rise in inflation was down to tariffs.

All three major Wall Street indices closed higher on the news, while government bond yields fell after the Fed announced it would slow down the rate at which it is reducing its balance sheet, which swelled during the pandemic.

In an unusual move, Fed governor Christopher Waller opposed the Fed’s rate decision because of his colleagues’ support for slowing down the pace at which it is shrinking the balance sheet.

Since returning to office in January, Trump has ramped up levies on top trading partners including China, Canada and Mexico—only to roll some of them back—and threatened to impose reciprocal measures on other countries. Many analysts fear Trump’s economic policies could push up inflation and hamper economic growth, and complicate the Fed’s plans to bring inflation down to its long-term target of two percent while maintaining a healthy labor market.

“Everybody knew there was not going to be a rate cut,” Moody’s Analytics economist Matt Colyar told AFP after the Fed’s decision was published. “What has changed is the kind of broader economic environment, mostly coming out of chaotic policy coming from DC.”

Until fairly recently, the hard economic data pointed to a robust American economy, with the Fed’s favored inflation measure showing a 2.5 percent rise in the year to January—above target but down sharply from a four-decade high in 2022. Economic growth was relatively robust through the end of 2024, while the labor market has remained quite strong, with healthy levels of job creation and the unemployment rate hovering close to historic lows.

But the mood has shifted in the weeks since Trump returned to the White House, with inflation expectations rising and financial markets tumbling amid his on-again, off-again rollout of tariffs.

In updated economic forecasts published Wednesday, Fed policymakers sharply cut their growth forecast for this year to 1.7 percent, down from 2.1 percent in the last economic outlook in December. They also downgraded their outlook for growth next year, while raising their forecast for headline inflation in both 2025 and 2026.

But they kept their rate cut predictions largely unchanged, penciling in two rate cuts this year and next, in line with their previous forecast.

Powell told reporters that the risk of recession in the United States had risen slightly in recent weeks, but was not yet a cause for concern. “If you go back two months, people were saying that the likelihood of a recession was extremely low,” he said. “It has moved up but it’s not high.” — AFP