Federal Reserve defies Trump, keeps rates the same

WASHINGTON >> The Federal Reserve left interest rates unchanged on Wednesday, defying a push from President Donald Trump for lower rates intended to stimulate the economy.

The U.S. economy is “solid,” the central bank said in a statement, suggesting it was in no rush to move interest rates, which are at just under 2.5%.

“The [Fed] will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,” the Fed wrote in a statement released at the conclusion of their two-day policy meeting. The next meeting is scheduled for June 1819.

Fed leaders have repeatedly said they will be “patient” on any rate hikes, and they are not forecasting any increases or decreases this year.

Trump tweeted Tuesday that the economy would “go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing.”

The actions Trump wants from the Fed are typically used only in periods of severe economic and financial stress, which there is little evidence of now.

Quantitative easing, or “QE,” was a bond buying program the Fed utilized in the aftermath of the financial crisis to pump money into the financial system and keep interest rates low. The Fed announced it would cease QE in 2014.

The Fed’s main concern at the moment is that inflation, a measure of how much the cost of living is rising, might be too low. The central bank’s statement included strongly worded language about inflation running below the Fed’s 2 percent target.

“Overall inflation and inflation for items other than food and energy have declined and are running below 2 percent,” the Fed wrote. “On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.”

The central bank’s preferred inflation measure is sitting at 1.6%. Most Americans don’t mind that prices on many goods aren’t rising much, leaving the Fed to mull whether it needs to adjust its target or take action to spur inflation.

The Fed’s mostly upbeat assessment of the economy comes as Trump’s plans to install allies on the central bank’s board appear to be unraveling. He planned to nominate businessman Herman Cain and economic commentator Stephen Moore to the final two openings on the Fed’s Board of Governors, but Republican senators stonewalled Cain, forcing him to withdraw from consideration. Moore’s candidacy is also in doubt after at least seven Republican senators expressed serious concerns about him.

Trump was irate after the central bank raised interest rates several times last year, which he views as a threat to his reelection chances. The bank undertook the moves to keep the economy from overheating after Trump’s tax cuts, as well as because Fed Chair Jerome Powell believed the economy no longer needed the stimulus of low rates.