Fed holds interest rates steady, defying pressure from Trump
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(WASHINGTON) — The Federal Reserve held interest rates steady on Wednesday, just weeks after President Donald Trump intensified calls for lower borrowing costs and voiced eagerness about the potential “termination” of Fed Chair Jerome Powell.
In recent days, Trump has dialed back his attacks on Powell, saying he will not fire Powell before the end of the top central banker’s term next year. Trump has reiterated his displeasure with the level of interest rates, however, urging the central bank to lower them.
The move marked the Fed’s second consecutive decision to maintain the current level of interest rates, repeating an approach taken in January. Before that, the Fed had cut rates at three consecutive meetings.
The Federal Open Market Committee (FOMC), a policymaking body at the Fed, said Wednesday that key economic indicators had improved but it cautioned of heightened economic uncertainty.
“Risks of higher unemployment and higher inflation have risen,” the FOMC said in a statement.
Last month, Powell raised the possibility that Trump’s tariffs may cause what economists call “stagflation,” which is when inflation rises and the economy slows.
If the Fed raises interest rates as a means of protecting against tariff-induced inflation under such a scenario, it risks stifling borrowing and slowing the economy further. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a potential slowdown, it threatens to boost spending and worsen inflation.
Still, Powell pointed to solid economic performance as a reason to take a patient approach as policymakers await the impact of tariffs.
“For the time being, we are well-positioned to wait for greater clarity,” Powell told an audience at the Economic Club of Chicago.
Powell noted the possibility of a shift in economic conditions, saying, “Life moves pretty fast.”
The rate decision arrives days after fresh data showed robust job growth in April.
Despite flagging consumer sentiment and market turmoil, the labor market has provided a bright spot since Trump took office. Meanwhile, inflation cooled in March, the most recent month for which data is available.
Even so, recession fears are mounting on Wall Street as Trump’s tariffs threaten to upend global trade. Goldman Sachs earlier this month hiked its odds of a recession from 35% to 45%. JPMorgan pegged the probability of a recession this year at 60%.
A government report last week showed the U.S. economy shrank over the first three months of 2025, much of which took place as Trump’s flurry of tariff proposals stoked uncertainty among businesses and consumers.
U.S. gross domestic product, or GDP, declined at a 0.3% annualized rate over three months ending in March, according to government data released on Wednesday. The figure marked a sharp dropoff from 2.4% annualized growth over the final three months of 2024.
The rate decision on Wednesday also marks the first adjustment of borrowing costs since Trump’s closely watched “Liberation Day” tariff announcement on April 2, which triggered the biggest single-day stock market drop since the COVID-19 pandemic.
Days later, Trump suspended a major swathe of the tariffs, sending the market to one of its largest ever single-day increases. A simultaneous escalation of tariffs on Chinese goods kept the effective tariff rate at its highest level in more than a century, the Yale Budget Lab found.
The White House is seeking to strike trade agreements with dozens of U.S. trade partners before the 90-day suspension of so-called “reciprocal tariffs” expires in July.
“As we gain a better understanding of the policy changes, we will have a better sense of the implications for the economy,” Powell said last month.
(WASHINGTON) — President Donald Trump has disrupted global trade and roiled markets in an effort to bring manufacturing jobs back to the U.S. Some of his top tech allies, however, have backed ventures that replace human workers with robots.
Elon Musk, a top donor and adviser to Trump, has touted humanoid robots as a future growth area for electric-carmaker Tesla. “You can produce any product,” Musk said of the robots’ potential capacity during a February interview with Dubai’s World Governments Summit.
Amazon founder Jeff Bezos, who Trump last month called “terrific,” has invested in several advanced robotics firms.
Bezos last year poured funds into Figure, a humanoid robot company that says its initial rollout will focus on manufacturers and warehouses, among other business applications. “We believe humanoids will revolutionize a variety of industries,” the company says on its website.
Nvidia CEO Jensen Huang and OpenAI CEO Sam Altman – both of whom joined Trump on his recent trip to the Middle East – helmed their respective companies as each invested in Figure. OpenAI ended its partnership with Figure last year.
“Trump is talking about bringing back the jobs, and he’s not understanding the tension between that goal and automation, which the tech bros have enthusiasm for,” Harry Holzer, a professor of public policy at Georgetown University and a former chief economist at the U.S. Department of Labor, told ABC News. “There’s a fundamental conflict between those goals.”
Musk did not immediately respond to ABC News’ request for comment made through Musk-owned firm SpaceX. Neither Bezos, Huang nor Altman responded to ABC News’ request.
Speaking at a conference in April, Huang said the onset of artificial intelligence would fuel “new types of factories,” which in turn would create jobs in construction and steelmaking, as well as in trades such as plumbing and electricity.
Even more, Huang said, AI is set to trigger a surge in productivity at companies that adopt the new technology, allowing them to add employees as the firms increase output and revenue.
“New jobs will be created, some jobs will be lost, every job will be changed,” Huang said. “Remember, it’s not AI that’s going to take your job. It’s not AI that’s going to destroy your company. It’s the company and the person who uses AI that’s going to take your job. And so that’s something to internalize.”
Even after a rollback of some levies, consumers face the highest overall average effective tariff rate since 1934, the Yale Budget Lab found earlier this month.
A key reason for the tariffs, White House officials say: Reshoring factories and rejuvenating employment in the manufacturing industry.
Commerce Secretary Howard Lutnick said this month in an interview with Fox News that Trump’s vision for ushering in a “golden age” for America involved enticing manufacturers to open factories and build in the United States.
“We’re going to have huge jobs in manufacturing. You’ve heard the president talk about trillions and trillions of factories being built in America,” he said in the interview on May 11.
In response to ABC News’ request for comment, White House Spokesperson Kush Desai said “the importance of President Trump’s push to reinvigorate American industry goes beyond creating good-paying jobs for everyday Americans.”
“Supply chain shocks of critical pharmaceuticals, medical equipment, and semiconductors during the COVID era prove that America cannot rely on foreign imports. The Trump administration remains committed to reshoring manufacturing that’s critical to our national and economic security with a multifaceted approach of tariffs, tax cuts, rapid deregulation, and domestic energy production,” Desai added.
The share of U.S. workers in manufacturing has plummeted for decades. Roughly 8% of U.S. workers currently hold positions in manufacturing, which marks a steep decline from about a quarter of all employees as recently as 1970.
Researchers attribute such decline to overlapping trends, including the offshoring of manufacturing to low-wage markets overseas and the adoption of labor-saving technology throughout the sector.
Long before current advances, automation significantly increased productivity in U.S. factories, meaning the same number of workers could produce many more goods, researchers at Ball State University found in 2015. As a result, they said, manufacturing employment stagnated for decades even as output climbed.
“Automation is something we’ve seen for a long time,” Philipp Kircher, a professor of industrial and labor relations at Cornell University, told ABC News.
Some of Trump’s tech allies have backed firms that seek to further automate manufacturing, touting a new wave of artificial-intelligence equipped robots as a replacement for some workers and salve for labor shortages.
Robotics outfit Vicarious boasts $250 million in investments from a set of backers that includes Bezos, Musk and Meta CEO Mark Zuckerberg – all of whom flanked Trump during his inauguration.
On a webpage displaying photos of robots for use in warehouse settings, Vicarious tells potential clients that the products can “reduce both your costs and person-hour needs.”
In 2022, Vicarious was acquired by Alphabet-backed robotics software firm Intrinsic. Alphabet CEO Sundar Pichai also sat alongside tech leaders at Trump’s inauguration.
Alphabet did not respond to ABC News’ request for comment. Meta declined to comment.
Yong Suk Lee, a professor of economics and technology at the University of Notre Dame, described the views on automation among Trump’s tech allies and some of his trade advisers as “opposed.”
The tech position, Lee said, would likely win out, even if some firms do open plants in the U.S.
“If you want to reshore, are you going to pay the same wages as Vietnam? Probably not,” Lee said. “Companies are faced with higher labor costs. In that case, they’ll probably automate.”
Discordant views among some tech leaders and White House officials surfaced in April, when Musk sharply criticized tariff-advocate Peter Navarro, Trump’s senior counselor for trade and manufacturing. Navarro, Musk said, is “truly a moron.”
In an interview with CNBC, Navarro responded, saying Musk “isn’t a car manufacturer — he’s a car assembler.”
To be sure, analysts said, automation in manufacturing would likely continue regardless of support from Trump’s tech allies, since producers are locked in a competition to lower costs and increase output. The precise outlook for manufacturing employment is unclear, they added, since additional technology may add jobs for those maintaining and optimizing the machinery.
“Whether it’s the companies that currently support the U.S. president or not, somebody would be doing this innovation, maybe slightly slower,” Kircher said.
Even at current employment levels, a labor shortage bedevils U.S. manufacturers. Roughly one of every five U.S. factories that failed to produce at full capacity cited a shortage of workers, Jason Miller, a professor of supply chain management at Michigan State University, found in a January study analyzing government data.
Agility Robots, an Amazon-backed firm building humanoid robots, identifies the current push for rejuvenated U.S. manufacturing as an opportunity for greater adoption of technology.
“Manufacturing companies are seeing a massive reshoring movement spanning various industries,” Agility Robots says on its website. “Adding a humanoid robot to your manufacturing facility is a great way to stay on the leading edge of automation.”
In response to ABC News’ request for comment, an Amazon spokesperson pointed to previous remarks about robotics made by a company executive.
“Our goal is to ensure these systems improve safety and productivity. Technology should be used to help us retain and grow our talent through skill development and reimagining how we make our workplace better, both in productivity and safety. If we do this well, we’re certain to always innovate for our customers,” Tye Brady, chief technologist at Amazon Robotics, said in a September blog post.
Amazon has “created more U.S. jobs in the last decade than any other company,” Amazon said this month.
(NEW YORK) — Oil prices fell and stocks closed higher on Monday, indicating optimism among investors about the limits of economic fallout from the ongoing Israel-Iran conflict.
The Dow Jones Industrial Average closed up 317 points, or 0.7%, erasing much of the losses suffered on Friday as back-and-forth strikes broke out between the two countries.
The S&P 500 climbed 0.9% on Monday, while the tech-heavy Nasdaq jumped 1.5%. In each case, the gains erased nearly all of the losses suffered as the conflict began days earlier.
Oil prices, meanwhile, ticked slightly lower on Monday, easing a surge in prices set off late last week as investors feared a wider regional war in the oil-rich Middle East.
The U.S. West Texas Intermediate futures price — a key measure of U.S. oil prices — dropped 2.3% on Monday. Brent crude future prices, another top measure of oil prices, also fell about 1.8%. Each index had climbed as much as 10% in the immediate aftermath of the conflict.
Aerial attacks between Israel and Iran continued overnight into Monday, marking a fourth day of strikes following Israel’s Friday attack. That surprise operation hit at the heart of Iran’s nuclear program, striking key facilities and killing several nuclear scientists as well as high-ranking military leaders, according to Israeli officials.
The U.S. did not provide any military assistance or have any involvement in Israel’s Friday strikes, a U.S. official told ABC News. President Donald Trump told ABC News on Sunday, “It’s possible we could get involved.” The U.S. did provide assistance in shooting down incoming missile and drone attacks from Iran in response to Israel’s initial barrage, officials said.
The drop in oil prices may ease a potential uptick in the price of gasoline for U.S. drivers.
Since crude oil makes up the top ingredient in car fuel, the Israel-Iran conflict threatened to modestly increase prices over the coming days and significantly hike them in the event of a wider war, experts previously told ABC News.
“By later this week, we’ll likely see nearly all states with price increases as retail gas prices rise following Iran/Israel attacks,” Patrick de Haan, the head of petroleum analysis at GasBuddy, said on Monday in a post on X.
The move higher for U.S. stocks mirrored gains in markets across Asia and Europe. The STOXX Europe 600 index ticked up 0.3% by mid-afternoon local time. In Japan, the Nikkei 225 in Tokyo climbed 1.2% on Monday.
ABC News’ David Brennan contributed to this report.
(NEW YORK) — President Donald Trump’s administration is set to begin collecting defaulted student loan payments next week — which could harm the credit scores of millions of borrowers.
Roughly 5 million borrowers will have their university and college loans sent for collections beginning May 5, the Department of Education said last month.
When that happens, the borrowers’ credit scores could be impacted, since ratings agencies are often alerted when collections ensue, experts told ABC News.
Here’s what to know about the collections and what it could mean for borrowers’ credit scores:
Why are the credit scores of some student loan borrowers at risk?
Student loan borrowers are considered delinquent if they fail to make a loan payment for 90 days. When late payment stretches on for a total of 270 days, then the borrower falls into default. When a federal student loan enters default, the government can send it for collections, garnishing wages or even taking money from Social Security payments or tax refunds.
The risk to borrowers’ credit scores dates back to policy decisions made when former President Joe Biden’s administration resumed federal student loan payments after a period of relief that had been enacted during the COVID-19 pandemic.
When the Biden administration lifted the pause in the fall of 2023, the White House set in motion a 12-month moratorium. The administration did not count late payments toward delinquency. That moratorium ended in October — meaning borrowers could be considered delinquent if they didn’t make payments for more than 90 days, returning to the way the process worked pre-pandemic.
More than 9 million student loan borrowers will face “significant drops” in their credit score when delinquencies resume over the first half of 2025, the New York Federal Reserve found in March.
“These credit score effects show up with delinquencies – that’s when the credit score takes the hit,” Judith Scott-Clayton, a professor of economics and education at Teachers College, Columbia University, told ABC News.
Similarly, the Biden administration in 2023 initiated a one-year moratorium during which it would not report loan defaults to credit bureaus. That pause expired on Jan. 1.
Now, the Trump administration is set to begin collections on defaulted loans, causing further potential damage to credit scores, some experts told ABC News.
“The longer you remain delinquent, that will compound,” Kate Wood, a writer and spokesperson at NerdWallet, told ABC News.
How much do late college loan payments hurt a borrower’s credit score?
Late payments on a college loan can significantly hurt a borrower’s credit score, studies show.
The New York Federal Reserve found student loan delinquency causes a borrower with a credit score of 760 points or higher to lose 171 points on average, according to a study of loan data between 2016 and 2019.
Subprime borrowers with credit scores at or below 620 lose on average 87 points in the event of a student loan delinquency, the study said.
“The consequences are worse for those starting out with good credit scores,” Scott-Clayton said.
VantageScore, a credit-scoring system, said in February that late college loan payments can result in a credit score loss of up to 129 points. Student loan borrowers who make payments on time could see credit score increases of up to 8 points, VantageScore said.
What does a damaged credit score mean for borrowers’ finances?
Borrowers with lowered credit scores will face greater difficulty making big-ticket purchases like homes, cars or even refrigerators for which they may need to take out a loan, experts told ABC News.
When consumers with reduced credit scores seek a loan, they face higher interest rates as banks determine that the borrower risks an inability to repay.
“We’re talking about a chunk of the population who won’t be able to buy a car because they won’t be able to get access to a car loan or it will be prohibitively expensive,” Kirabo Jackson, a professor of education and social policy at Northwestern University, told ABC News.
A lower credit score can even jeopardize an individual’s job prospects, since some employers check an applicant’s credit, Jackson said.
Some states restrict an employer’s ability to check an applicant’s credit, including California.
The damage to borrower’s credit scores may cause a hiccup in the overall economy, since some individuals may forgo big purchases, Jackson said.
“It’s not a huge effect for the economy but it certainly won’t be helpful,” Jackson said. “And when you talk about the impact for the individuals, it will be quite considerable.”
