US Federal Reserve defies calls from Donald Trump to cut interest rate

The Federal Reserve has defied calls from US President Donald Trump for a cut to the interest rate by leaving it unchanged.

The decision means it stays in the range of 4.3%, where it has remained after the bank, known as the Fed, reduced it three times last year.

“We’re keeping the rates high, and it’s hurting people from buying houses,” Mr Trump told reporters. “All because of the Fed.”

Mr Trump has repeatedly been asked whether he would fire Fed chair Jerome Powell if he failed to heed his demand to cut the rate. Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.

In June, the US president labelled Mr Powell a “stupid person” after the Fed decided not to change rates, then less than two weeks later said the Fed’s chair should ashamed.

The US president has spent months verbally attacking Mr Powell, last week calling Powell “terrible” and told politicians in a gathering at the White House he was “either evil or stupid”.

There was also clear tension between the pair last Thursday as they toured the Federal Reserve in Washington DC, which is undergoing renovations.

When taking questions, Mr Trump said: “I’d love him to lower interest rates,” then laughed and slapped Powell’s arm.

The US president also challenged him, in front of reporters, about an alleged overspend on the renovations and produced paperwork to prove his point. Mr Powell shook his head as Trump made the claim.

When Mr Trump was asked he would do as a real estate mogul if this happened to one of his projects, he said he’d fire his project manager – seemingly in reference to Mr Powell.

The Fed has expressed concern about the impact of Mr Trump’s signature economic policy of implementing new tariffs, taxes on imports to the US.

On Wednesday, the president said he was still negotiating with India on trade after announcing the US will impose a 25% tariff on goods imported from the country from Friday.

Mr Trump also signed an executive order on Wednesday implementing an additional 40% tariff on Brazil, bringing the total tariff amount to 50%, excluding certain products, including oil and precious metals.

Nathan Thooft, chief investment officer at Manulife Investment Management, described the rate decision as a “kind of a nothing burger” and it was “widely expected”.

Tony Welch, chief investment officer at SignatureFD, agreed that it was “broadly as expected”. He added: “That explains why you’re not seeing a lot of movement in the market right now because there’s nothing that’s surprising.”

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