US Fed keeps interest rates unchanged despite pressure from Trump administration

NEW YORK -- The US Federal Reserve on Wednesday kept the target range for the federal funds rate unchanged at 4.25 percent to 4.5 percent, though it faces stark pressure and harsh criticism from the Trump administration.

"Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated," said a statement by the Federal Open Market Committee (FOMC).

Uncertainty about the economic outlook remains elevated, said the statement.

The US economy expanded at an annualized rate of 3 percent in the second quarter, compared with a contraction of 0.5 percent in the first quarter, according to data released Wednesday by the US Commerce Department.

The FOMC added that it is "strongly committed to supporting maximum employment and returning inflation to its 2 percent objective."

US consumer price index rose by 2.7 percent in June compared to a year earlier and saw the largest increase since February, which is seen as the start of tariff-driven inflation.

Notably, among the 12 voting members of the FOMC, two voted for a cut in the benchmark interest rate by 25 basis points, while a Fed board member did not cast a vote.

"It seems to me, and to almost the whole committee, that the economy is not performing as though restrictive policy is holding it back inappropriately and modestly restrictive policy seems appropriate," said Fed Chair Jerome Powell at a press conference Wednesday.

The Fed had not yet determined whether it would cut rates at its September meeting, he said.

"Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen," said Powell.

The Fed does not consider the cost of rate changes to the governments and the fiscal needs of the federal government, he added.

"No advanced economy's central bank does that ... If we did do that, it wouldn't be good, neither for our credibility nor for the credibility of US fiscal policy," said Powell.

Trump on Wednesday once again urged Powell to lower interest rates, citing better-than-expected GDP data in the second quarter.

"No Inflation! Let people buy, and refinance, their homes!" Trump said in a post on social media.