Rising prices and stalling growth leaves Fed’s hands tied as the president’s mismanagement batters consumers and businesses alike
Today, the Federal Reserve held the federal funds rate steady at 3.50% to 3.75%. The decision comes as Trump’s economy continues to creep toward stagflation: his war in Iran is driving up energy prices and stokes overall inflation, while economic growth slows and the labor market’s volatile swings leave workers in limbo. The deterioration of the economy under Trump is already clear to consumers, with sentiment falling to an all-time low in April.
Groundwork’s Managing Director of Policy and Advocacy Elizabeth Pancotti shared her reaction to the rate decision:
“Trump’s destructive mismanagement has forced the Fed in a no-win situation and working families into an impossible one. The fallout of his disastrous foreign wars have piled on to his tariffs, driving prices higher and threatening the livelihoods of American workers. As the Fed grapples with the inflationary risks of cutting rates and the risks to the labor market rate hikes could bring, monetary policymakers had no choice but to hold rates steady as Trump threatens their ability to deliver on either mandate, leaving American workers to bear the burden of Trump’s expensive and unstable economy.”
BACKGROUND
Trump’s war in Iran and tariffs are driving up inflation, backing the Fed into a corner. The Consumer Price Index (CPI) rose 0.9% in March, the largest monthly jump since June 2022, pushing annual inflation to 3.3%.
The labor market is weak and unstable. Despite the economy adding 178,000 jobs in March, the economy shed 133,000 jobs in February and averaged just 68,000 jobs per month in the first quarter of 2026. A Federal Reserve research note described this year’s weak job growth as “unprecedented in recent U.S. history.” The unemployment rate ticked down in March, but only because the labor force shrank.
Growth is stalling. GDP growth slowed to just 0.5% in the fourth quarter of 2025, marking a sharp deceleration from earlier last year. Early indicators suggest growth in the first quarter of 2026 will remain weak – the Atlanta Fed’s GDPNow estimates just 1.2% ahead of tomorrow’s official advance estimate. This sluggish growth signals an economy that is struggling to sustain expansion.