US Federal Reserve Chairman Jerome Powell | Photo Credit: Reuters
Federal Reserve officials have emphasized that interest rates have been stabilized for the third bright meeting, increasing the risk of both inflation and increased unemployment.
“Uncertainty about the economic outlook is growing even more,” the Federal Open Market Committee said in a statement Wednesday at the conclusion of its two-day meeting in Washington. “The committee is paying attention to risks on both sides of the dual mission, with judges increasingly increasing risks of higher unemployment and higher inflation.”
Officials voted unanimously to keep the benchmark federal funding rate in the 4.25% to 4.5% range since December.
The US Stocks and Treasury S&P 500 Index fell after the announcement, but the dollar made profits.
President Donald Trump’s trade policy unleashed a wave of uncertainty across the economy. Taxation is still under negotiation, but economists are widely hoping that vast tariffs will promote inflation and consider growth. It would oppose each other’s two goals: price stability and maximum employment.
Chair Jerome Powell will hold a press conference with reporters in Washington at 2:30pm.
With unemployment still demanding low and stable, Fed officials say it is comfortable to maintain Changi until they have a better understanding of where the economy is heading. But Trump has repeatedly said that central banks should lower borrowing costs.
Powell and his colleagues are determined to prevent tariffs from causing a sustained increase in inflation, and some officials have shown they will not preemptively support lower interest rates to protect the slowdown of the economy.
Economic image
With concerns about the recession growing, some companies report suspending investment decisions in light of uncertainty. Still, the labour market is resilient, with employers adding 177,000 jobs in April. Fed officials described the labor market situation as “solid,” according to a statement.
Economists say it takes time for the new tariff to have a complete impact on functioning through the economy. So far, this impact has mainly included a sharp decline in emotions and a surge in imports. The US economy signed its first contract at the beginning of the year since 2022, but the underlying demand measure was solid.
“While net export fluctuations have affected the data, recent indicators suggest that economic activity continues to expand at a steady pace,” the statement said.
Companies scrambled in the first quarter to import goods ahead of tariffs, and the March surge in consumer spending suggests households were also trying to frontload purchases. The main inflation gauge was cooled that month.
Meanwhile, Trump has stepped up his criticism of Powell in recent weeks. At one point, Trump said in a social media post that “Powell’s end cannot come quickly enough.”
However, the president has since insisted that he has no intention of firing Powell.
The Fed said it will continue to shrink its balance sheet as the pace announced at its March meeting. The monthly cap for Treasury securities, which could mature at $5 billion without being reinvested, was also unchanged at $35 billion, at the mortgage-backed securities cap.
The central bank announced Tuesday that Kansas City federal president Jeff Schmid will miss the May meeting due to his wife’s recent death. Kansas City was represented by Kim Robbins’ First Vice President. Schmidt’s vote was passed to Neil Kashkari, an alternative member of the Minneapolis federal government.
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Released on May 8, 2025
