The US Federal Reserve has decided to keep interest rates unchanged, as its chair Jerome Powell defended the importance of maintaining the central bank’s independence. The Fed said it will hold its main lending rate in the range of 3.5% to 3.75%, noting that economic activity in the United States “has been expanding at a solid pace”.
US President Donald Trump has repeatedly criticised Powell for not reducing interest rates more aggressively. More recently, federal prosecutors opened a criminal investigation into testimony Powell gave to the Senate regarding renovations to Federal Reserve buildings.
Speaking on Wednesday, Powell declined to comment directly on the investigation but warned that losing central bank independence would seriously damage its credibility and be difficult to reverse. He has previously suggested that the probe was linked to Trump’s frustration over the pace of rate cuts.
At his first press conference since publicly criticising the Department of Justice investigation, Powell emphasised that independence is essential to prevent monetary policy from being influenced by politics.“It is an institutional arrangement that has served the public well by keeping elected officials out of direct control over monetary policy,” he said. “If that independence is lost, restoring the credibility of the institution would be extremely difficult.
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