The Federal Reserve (Fed) of the United States stood firm against President Donald Trump and decided to leave interest rates unchanged in their current range of 4.25% to 4.5%, while issuing a strong warning about the negative effects that the new tariff policy could have on the country's economy.
In a context of rising trade tensions, Fed Chairman Jerome Powell warned that maintaining tariffs would "likely" create a dangerous combination: a resurgence of inflation, a slowdown in economic growth, and an increase in unemployment, reported the news agency EFE.
Although he avoided directly mentioning Trump, his statements made it clear the impact that recent protectionist measures are having on the American economy.
The warning comes after the release of data revealing a 0.3% contraction in GDP in the first quarter of the year, the first decline since 2022, and an increase in the trade deficit which reached 140.5 billion dollars in March.
Powell has remained steadfast against the political pressures led by Trump to lower interest rates—the president insists that "there is no inflation" and criticizes Powell through his Truth Social platform. The central bank chairman emphasized that his priority is economic stability and that he will not yield to political pressure.
"We will use our tools to promote maximum employment and price stability. We will only consider economic data, not political comments," Powell stated at a press conference.
In an escalation of tensions, Trump has not only publicly questioned Powell's decisions but has also hinted that he might oust him before the end of his term, which is set to conclude in 2026.
In his most recent statements, the president praised tariffs as a source of "wealth for the United States" and accused the Fed of hindering economic progress.
Analysts and investors are watching with concern the possibility of direct interference from the Executive in the independence of the Fed. “If the autonomy of the central bank is eroded, the markets could react very negatively,” warns Krishna Guha of Evercore ISI.
The U.S. economy now faces a crossroads. While the White House defends tariffs as a strategy to strengthen the domestic industry, the data reveals signs of slowing down and an increasing trade deficit.
Powell has made it clear that the Fed is ready to act, but it will not make hasty decisions.
This confrontation marks a key moment in the relationship between the country's monetary policy and trade policy, with implications that could extend far beyond U.S. borders.
Frequently Asked Questions about Trump's Tariff Policy and the Federal Reserve's Response
What stance has the Federal Reserve taken regarding Trump's trade policy?
The Federal Reserve has warned about the negative effects of Trump’s tariff policy, noting that it could lead to a rise in inflation, a slowdown in economic growth, and an increase in unemployment. Jerome Powell, the Fed chair, has emphasized the importance of economic stability and stated that decisions will be based on economic data, not political pressures.
How has Trump's tariff policy affected the U.S. economy?
Trump's tariff policy has led to a contraction of GDP by 0.3% in the first quarter of 2025 and has increased the U.S. trade deficit to $140.5 billion. Furthermore, the uncertainty generated by these measures has negatively impacted financial markets, causing significant declines in stock markets.
What consequences could Trump's possible interference with the Federal Reserve have?
A direct interference by Trump in the Federal Reserve could undermine its autonomy, potentially leading to a negative reaction in financial markets and undermining confidence in the stability of U.S. monetary policy. Analysts have expressed concern over the possibility that Trump might dismiss Jerome Powell before the end of his term.
Why does Trump defend tariffs as a source of wealth for the U.S.?
Trump defends tariffs as a tool to strengthen the national industry and regain economic control, arguing that these measures will enrich the United States in the long run. However, current economic data and warnings from experts indicate that tariffs have contributed to an economic slowdown and rising inflation.
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