Politics

Fed pauses interest rate cuts. What happens next may depend on Trump

Published

12 months ago

January 29, 2025

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

Video: Fed Chair Responds to Inquiry on Building Renovations

Published

9 hours ago

January 12, 2026

Press Room

Video: Fed Chair Responds to Inquiry on Building Renovations

new video loaded: Fed Chair Responds to Inquiry on Building Renovations

transcript

Fed Chair Responds to Inquiry on Building Renovations

Federal prosecutors opened an investigation into whether Jerome H. Powell, the Federal Reserve chair, lied to Congress about the scope of renovations of the central bank’s buildings. He called the probe “unprecedented” in a rare video message.

: “Good evening. This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead, monetary policy will be directed by political pressure or intimidation.” “Well, thank you very much. We’re looking at the construction. Thank you.”
Advertisement

Federal prosecutors opened an investigation into whether Jerome H. Powell, the Federal Reserve chair, lied to Congress about the scope of renovations of the central bank’s buildings. He called the probe “unprecedented” in a rare video message.

By Nailah Morgan

January 12, 2026

Politics

San Antonio ends its abortion travel fund after new state law, legal action

Published

10 hours ago

January 12, 2026

Press Room

San Antonio ends its abortion travel fund after new state law, legal action

NEWYou can now listen to Fox News articles!

San Antonio has shut down its out-of-state abortion travel fund after a new Texas law that prohibits the use of public funds to cover abortions and a lawsuit from the state challenging the city’s fund.

City Council members last year approved $100,000 for its Reproductive Justice Fund to support abortion-related travel, prompting Texas Attorney General Ken Paxton to sue over allegations that the city was “transparently attempting to undermine and subvert Texas law and public policy.”

Paxton claimed victory in the lawsuit on Friday after the case was dismissed without a finding for either side.

WYOMING SUPREME COURT RULES LAWS RESTRICTING ABORTION VIOLATE STATE CONSTITUTION

Texas Attorney General Ken Paxton claimed victory in the lawsuit after the case was dismissed without a finding for either side. (Hannah Beier/Bloomberg via Getty Images)

“Texas respects the sanctity of unborn life, and I will always do everything in my power to prevent radicals from manipulating the system to murder innocent babies,” Paxton said in a statement. “It is illegal for cities to fund abortion tourism with taxpayer funds. San Antonio’s unlawful attempt to cover the travel and other expenses for out-of-state abortions has now officially been defeated.”

But San Antonio’s city attorney argued that the city did nothing wrong and pushed back on Paxton’s claim that the state won the lawsuit.

“This litigation was both initiated and abandoned by the State of Texas,” the San Antonio city attorney’s office said in a statement to The Texas Tribune. “In other words, the City did not drop any claims; the State of Texas, through the Texas Office of the Attorney General, dropped its claims.”

Texas Attorney General Ken Paxton said he will continue opposing the use of public funds for abortion-related travel. (Justin Lane/Reuters)

Paxton’s lawsuit argued that the travel fund violates the gift clause of the Texas Constitution. The state’s 15th Court of Appeals sided with Paxton and granted a temporary injunction in June to block the city from disbursing the fund while the case moved forward.

Gov. Greg Abbott in August signed into law Senate Bill 33, which bans the use of public money to fund “logistical support” for abortion. The law also allows Texas residents to file a civil suit if they believe a city violated the law.

“The City believed the law, prior to the passage of SB 33, allowed the uses of the fund for out-of-state abortion travel that were discussed publicly,” the city attorney’s office said in its statement. “After SB 33 became law and no longer allowed those uses, the City did not proceed with the procurement of those specific uses—consistent with its intent all along that it would follow the law.”

TRUMP URGES GOP TO BE ‘FLEXIBLE’ ON HYDE AMENDMENT, IGNITING BACKLASH FROM PRO-LIFE ALLIES

Texas Gov. Greg Abbott signed a law in August that blocks cities from using public money to help cover travel or other costs related to abortion. (Antranik Tavitian/Reuters)

CLICK HERE TO DOWNLOAD THE FOX NEWS APP

The broader Reproductive Justice Fund remains, but it is restricted to non-abortion services such as home pregnancy tests, emergency contraception and STI testing.

The city of Austin also shut down its abortion travel fund after the law was signed. Austin had allocated $400,000 to its Reproductive Healthcare Logistics Fund in 2024 to help women traveling to other states for an abortion with funding for travel, food and lodging.

Politics

California Atty. Gen. Rob Bonta opts against running for governor. Again.

Published

11 hours ago

January 12, 2026

Press Room

California Atty. Gen. Rob Bonta opts against running for governor. Again.

California Atty. Gen. Rob Bonta announced Sunday that he would not run for California governor, a decision grounded in his belief that his legal efforts combating the Trump administration as the state’s top prosecutor are paramount at this moment in history.

“Watching this dystopian horror come to life has reaffirmed something I feel in every fiber of my being: in this moment, my place is here — shielding Californians from the most brazen attacks on our rights and our families,” Bonta said in a statement. “My vision for the California Department of Justice is that we remain the nation’s largest and most powerful check on power.”

Bonta said that President Trump’s blocking of welfare funds to California and the fatal shooting of a Minnesota mother of three last week by a federal immigration agent cemented his decision to seek reelection to his current post, according to Politico, which first reported that Bonta would not run for governor.

Bonta, 53, a former state lawmaker and a close political ally to Gov. Gavin Newsom, has served as the state’s top law enforcement official since Newsom appointed him to the position in 2021. In the last year, his office has sued the Trump administration more than 50 times — a track record that would probably have served him well had he decided to run in a state where Trump has lost three times and has sky-high disapproval ratings.

Bonta in 2024 said that he was considering running. Then in February he announced he had ruled it out and was focused instead on doing the job of attorney general, which he considers especially important under the Trump administration. Then, both former Vice President Kamala Harris and Sen. Alex Padilla (D-Calif.) announced they would not run for governor, and Bonta began reconsidering, he said.

“I had two horses in the governor’s race already,” Bonta told The Times in November. “They decided not to get involved in the end. … The race is fundamentally different today, right?”

The race for California governor remains wide open. Newsom is serving the final year of his second term and is barred from running again because of term limits. Newsom has said he is considering a run for president in 2028.

Former Rep. Katie Porter — an early leader in polls — late last year faltered after videos emerged of her screaming at an aide and berating a reporter. The videos contributed to her dropping behind Riverside County Sheriff Chad Bianco, a Republican, in a November poll released by the UC Berkeley Institute of Governmental Studies and co-sponsored by The Times.

Porter rebounded a bit toward the end of the year, a poll by the Public Policy Institute of California showed, however none of the candidates has secured a majority of support and many voters remain undecided.

California hasn’t elected a Republican governor since 2006, Democrats heavily outnumber Republicans in the state, and many are seething with anger over Trump and looking for Democratic candidates willing to fight back against the current administration.

Bonta has faced questions in recent months about spending about $468,000 in campaign funds on legal advice last year as he spoke to federal investigators about alleged corruption involving former Oakland Mayor Sheng Thao, who was charged in an alleged bribery scheme involving local businessmen David Trung Duong and Andy Hung Duong. All three have pleaded not guilty.

According to his political consultant Dan Newman, Bonta — who had received campaign donations from the Duong family — was approached by investigators because he was initially viewed as a “possible victim” in the alleged scheme, though that was later ruled out. Bonta has since returned $155,000 in campaign contributions from the Duong family, according to news reports.

Bonta is the son of civil rights activists Warren Bonta, a white native Californian, and Cynthia Bonta, a native of the Philippines who immigrated to the U.S. on a scholarship in 1965. Bonta, a U.S. citizen, was born in Quezon City, Philippines, in 1972, when his parents were working there as missionaries, and immigrated with his family to California as an infant.

In 2012, Bonta was elected to represent Oakland, Alameda and San Leandro as the first Filipino American to serve in California’s Legislature. In Sacramento, he pursued a string of criminal justice reforms and developed a record as one of the body’s most liberal members.

Bonta is married to Assemblywoman Mia Bonta (D-Alameda), who succeeded him in the state Assembly, and the couple have three children.

Times staff writer Dakota Smith contributed to this report.