Politics
Fed pauses interest rate cuts. What happens next may depend on Trump
WASHINGTON — After three successive interest rate cuts, the Federal Reserve on Wednesday made no change in its benchmark lending rate amid new economic uncertainties over the outlook for inflation and President Trump’s continued threats of new tariffs and other measures.
The Fed had been widely expected to ease back from the slow but steady stream of rate cuts last year, because economic growth has been stronger than many expected and the inflation rate has inched up after months of steady declines.
The Fed’s interest rate decisions have far-reaching effects on almost every facet of the economy, from corporate investment decisions and jobs to the price of cars and groceries. And its decisions rest on its analysis of forces likely to shape the course of the economy in coming months.
The avalanche of unexpectedly dramatic policy pronouncements in the first days of the new Trump administration has made the future unusually murky for such analysis. The president has promised a pro-growth agenda with lower taxes and reduced government regulation.
But he’s also threatening to impose higher tariffs on multiple countries, which could weigh on U.S. economic activity and reignite inflation.
That raises the possibility that the Fed could even reverse course and hike interest rates, which could put it on a collision course with Trump.
“Borrowers shouldn’t bank on the Fed being in any hurry to cut interest rates again,” said Greg McBride, chief financial analyst at Bankrate.com. “If we see inflation pressures ease on a consistent basis, I could see the Fed cutting interest rates 2 or 3 times this year. But if the progress on inflation remains stalled out, or if inflation picks up, the Fed will not cut interest rates at all.”
The extent and timing of Trump’s various policy actions are not in view yet. But Trump clearly wants lower interest rates. He has already said so on a number of occasions, and analysts expect the president may lash out at Fed Chair Jerome H. Powell if he doesn’t respond, as Trump did in his first term, adding to the pressures for the independent central bank.
The Fed’s policy statement Wednesday gave no new indication of what lies ahead.
Powell, in a news conference, said he had had no contact with Trump, and declined to comment on the president’s remarks about interest rates.
Asked what reassurance he could give about the Fed’s independence, Powell replied that he and his colleagues will continue to study the data to gauge the outlook and to use the tools that they have to achieve their goals — stable prices and maximum employment.
“That’s what we do, that’s always what we do. Don’t look for us to do anything else,” he said, adding that research shows that a central bank operating independently is best for the economy.
There was no immediate comment from Trump after the Fed’s decision was announced. Stocks generally traded lower after the release of the Fed statement.
Powell said the Fed would carefully watch the new administration’s policies. But for now, he said, Fed policies and the economy are in a good place and he saw no hurry to adjust interest rates.
At the end of December, Powell and his colleagues foresaw two quarter-point interest rate cuts for 2025, after shaving a full percentage point over three straight meetings last fall and winter.
By most accounts, the Fed’s key interest rate, now at a range of 4.25% to 4.5%, is somewhat restrictive in terms of the effect on the economy. And financial markets still expect two rate cuts this year.
But the prospect of significantly higher tariffs on imports and the launch already of Trump’s promised mass deportations of undocumented workers have the potential to spark higher inflation.
The departure of many foreign workers could shrink the labor supply and cause employers to bid up wages. Fatter paychecks, coupled with the added cost of new tariffs, would almost certainly add to inflationary pressures.
Many companies have already said they would expect to pass tariff costs on to consumers.
And for California, the outlook is further clouded by the current and still-to-come impact of the wildfires. The huge scale of the rebuilding is likely to fuel higher prices for things like lumber, and will probably lead to higher rents and home prices in the short term.
Overall consumer price inflation in the U.S. has come down sharply since peaking at near double digits in mid-2022, stoked by the pandemic, but in recent months has hovered near 3%. The Fed wants to get that down to 2%.
Progress has been impeded by higher-than-expected increases for housing as well as sharply higher prices last year for services such as motor vehicle insurance and repair costs. Food and energy prices also jumped late last year.
Since taking office, Trump has said he’ll bring both inflation and interest rates down by lowering oil prices, calling on OPEC to pump out more crude even as the president seeks to boost domestic production.
That alone would chip away at inflation, although analysts say that other Trump-favored policies such as tariffs aren’t compatible with lower prices.
“The mainstream [economic] view is that inflation is going to come down further,” said Christopher Rupkey, chief economist at Fwdbonds, an economic and markets research firm. “The 800-pound gorilla in the room, of course, is the newly elected president. His view on interest rates is known. … Regardless of the logic, he just wants interest rates to be lower.”
Politics
Federal judge blocks Trump from cutting childcare funds to Democratic states over fraud concerns
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A federal judge Friday temporarily blocked the Trump administration from stopping subsidies on childcare programs in five states, including Minnesota, amid allegations of fraud.
U.S. District Judge Arun Subramanian, a Biden appointee, didn’t rule on the legality of the funding freeze, but said the states had met the legal threshold to maintain the “status quo” on funding for at least two weeks while arguments continue.
On Tuesday, the U.S. Department of Health and Human Services (HHS) said it would withhold funds for programs in five Democratic states over fraud concerns.
The programs include the Child Care and Development Fund, the Temporary Assistance for Needy Families program, and the Social Services Block Grant, all of which help needy families.
USDA IMMEDIATELY SUSPENDS ALL FEDERAL FUNDING TO MINNESOTA AMID FRAUD INVESTIGATION
On Tuesday, the U.S. Department of Health and Human Services said it would withhold funds for programs in five Democratic states over fraud concerns. (AP Photo/Jose Luis Magana, File)
“Families who rely on childcare and family assistance programs deserve confidence that these resources are used lawfully and for their intended purpose,” HHS Deputy Secretary Jim O’Neill said in a statement on Tuesday.
The states, which include California, Colorado, Illinois, Minnesota and New York, argued in court filings that the federal government didn’t have the legal right to end the funds and that the new policy is creating “operational chaos” in the states.
U.S. District Judge Arun Subramanian at his nomination hearing in 2022. (Tom Williams/CQ-Roll Call, Inc via Getty Images)
In total, the states said they receive more than $10 billion in federal funding for the programs.
HHS said it had “reason to believe” that the programs were offering funds to people in the country illegally.
‘TIP OF THE ICEBERG’: SENATE REPUBLICANS PRESS GOV WALZ OVER MINNESOTA FRAUD SCANDAL
The table above shows the five states and their social safety net funding for various programs which are being withheld by the Trump administration over allegations of fraud. (AP Digital Embed)
New York Attorney General Letitia James, who is leading the lawsuit, called the ruling a “critical victory for families whose lives have been upended by this administration’s cruelty.”
New York Attorney General Letitia James, who is leading the lawsuit, called the ruling a “critical victory for families whose lives have been upended by this administration’s cruelty.” (Win McNamee/Getty Images)
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Fox News Digital has reached out to HHS for comment.
In what might be the most decisive critique yet of President Trump’s remake of the Kennedy Center, the Washington National Opera’s board approved a resolution on Friday to leave the venue it has occupied since 1971.
“Today, the Washington National Opera announced its decision to seek an amicable early termination of its affiliation agreement with the Kennedy Center and resume operations as a fully independent nonprofit entity,” the company said in a statement to the Associated Press.
Roma Daravi, Kennedy Center’s vice president of public relations, described the relationship with Washington National Opera as “financially challenging.”
“After careful consideration, we have made the difficult decision to part ways with the WNO due to a financially challenging relationship,” Daravi said in a statement. “We believe this represents the best path forward for both organizations and enables us to make responsible choices that support the financial stability and long-term future of the Trump Kennedy Center.”
Kennedy Center President Ambassador Richard Grenell tweeted that the call was made by the Kennedy Center, writing that its leadership had “approached the Opera leadership last year with this idea and they began to be open to it.”
“Having an exclusive relationship has been extremely expensive and limiting in choice and variety,” Grenell wrote. “We have spent millions of dollars to support the Washington Opera’s exclusivity and yet they were still millions of dollars in the hole – and getting worse.”
WNO’s decision to vacate the Kennedy Center’s 2,364-seat Opera House comes amid a wave of artist cancellations that came after the venue’s board voted to rename the center the Donald J. Trump and the John F. Kennedy Memorial Center for the Performing Arts. New signage featuring Trump’s name went up on the building’s exterior just days after the vote while debate raged over whether an official name change could be made without congressional approval.
That same day, Rep. Joyce Beatty (D-Ohio) — an ex officio member of the board — wrote on social media that the vote was not unanimous and that she and others who might have voiced their dissent were muted on the call.
Grenell countered that ex officio members don’t get a vote.
Cancellations soon began to mount — as did Kennedy Center‘s rebukes against the artists who chose not to appear. Jazz drummer Chuck Redd pulled out of his annual Christmas Eve concert; jazz supergroup the Cookers nixed New Year’s Eve shows; New York-based Doug Varone and Dancers dropped out of April performances; and Grammy Award-winning banjo player Béla Fleck wrote on social media that he would no longer play at the venue in February.
WNO’s departure, however, represents a new level of artist defection. The company’s name is synonymous with the Kennedy Center and it has served as an artistic center of gravity for the complex since the building first opened.
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Democratic Rep. Alexandria Ocasio-Cortez is leveling a stunning accusation at Vice President JD Vance amid the national furor over this week’s fatal shooting in Minnesota involving an ICE agent.
“I understand that Vice President Vance believes that shooting a young mother of three in the face three times is an acceptable America that he wants to live in, and I do not,” the four-term federal lawmaker from New York and progressive champion argued as she answered questions on Friday on Capitol Hill from Fox News and other news organizations.
Ocasio-Cortez spoke in the wake of Wednesday’s shooting death of 37-year-old Renee Nicole Good after she confronted ICE agents from inside her car in Minneapolis.
RENEE NICOLE GOOD PART OF ‘ICE WATCH’ GROUP, DHS SOURCES SAY
Members of law enforcement work the scene following a suspected shooting by an ICE agent during federal operations on January 7, 2026, in Minneapolis, Minnesota. (Stephen Maturen/Getty Images)
Video of the incident instantly went viral, and while Democrats have heavily criticized the shooting, the Trump administration is vocally defending the actions of the ICE agent.
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Vance, at a White House briefing on Thursday, charged that “this was an attack on federal law enforcement. This was an attack on law and order.”
“That woman was there to interfere with a legitimate law enforcement operation,” the vice president added. “The president stands with ICE, I stand with ICE, we stand with all of our law enforcement officers.”
And Vance claimed Good was “brainwashed” and suggested she was connected to a “broader, left-wing network.”
Federal sources told Fox News on Friday that Good, who was a mother of three, worked as a Minneapolis-based immigration activist serving as a member of “ICE Watch.”
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Ocasio-Cortez, in responding to Vance’s comments, said, “That is a fundamental difference between Vice President Vance and I. I do not believe that the American people should be assassinated in the street.”
But a spokesperson for the vice president, responding to Ocasio-Cortez’s accusation, told Fox News Digital, “On National Law Enforcement Appreciation Day, AOC made it clear she thinks that radical leftists should be able to mow down ICE officials in broad daylight. She should be ashamed of herself. The Vice President stands with ICE and the brave men and women of law enforcement, and so do the American people.”
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