Fed holds interest rates steady, defying direct pressure from the Trump administration

WASHINGTON (AP) — The Federal Reserve on Wednesday held interest rates steady following its first meeting of the year, resisting intense pressure from the White House to implement further cuts.

A majority of the Federal Open Market Committee (FOMC) voted to maintain the benchmark interest rate between 3.5% and 3.75%. The decision follows three consecutive rate reductions last autumn.

The move comes amid unprecedented pressure from the Trump administration on Fed Chair Jerome Powell, including personal attacks and a Department of Justice criminal investigation. That probe focuses on budget overruns related to the renovation of the Fed’s headquarters.

In a statement, Powell dismissed the investigation as a "pretext" intended to exert political influence over monetary policy. He emphasized that the Fed will continue to make decisions based on economic data rather than bowing to external pressure.

Powell noted that policymakers believe interest rates have reached a "neutral" level. The assessment signals that the central bank does not plan further cuts in the near future.

The Federal Reserve’s latest decision transcends mere monetary policy; it represents a critical stress test for the independence of America’s preeminent economic institution. The administration’s move to leverage the Department of Justice in a criminal probe targeting the Fed Chair marks an unprecedented escalation, transforming a standard policy debate into a direct confrontation that threatens the central bank’s foundational autonomy.

For Wall Street, the Fed’s resolve offers a measure of stability and predictability. It signals that the central bank remains committed to prioritizing long-term inflation control over the short-term, politically motivated growth cycles sought by the executive branch. However, the very nature of this conflict fuels market anxiety, as investors weigh the long-term risks of institutional politicization.

The ramifications of this hawkish stance extend significantly to emerging markets like Vietnam, presenting a double-edged sword for the Southeast Asian economy. On one hand, a sustained period of high U.S. interest rates will likely keep the dollar buoyant, providing a competitive pricing edge for Vietnamese exports—particularly in the textile and electronics sectors—as they land in U.S. markets.

On the other hand, the dollar’s strength exerts significant downward pressure on the Vietnamese dong (VND). This depreciation increases the servicing costs for Vietnamese firms holding dollar-denominated debt and may ultimately compel the State Bank of Vietnam to intervene to defend the currency and maintain macroeconomic stability.

The Federal Reserve’s decision to maintain high interest rates has a direct impact on Vietnamese-American small businesses. For entrepreneurs looking to expand their nail salons, phở restaurants, or other local ventures, higher borrowing costs pose a significant hurdle to growth. At the same time, rising consumer credit rates often lead to tighter household budgets, which can squeeze revenue for business owners across the community. However, there is a silver lining: a strong U.S. dollar increases the value of remittances. For those sending money back home to family in Vietnam, every dollar now converts to more Vietnamese Đồng, providing more substantial support for loved ones abroad.