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6d ago

Federal Reserve Holds Interest Rates Steady Amid Tariff Uncertainty

The Fed maintains rates at 4.25%-4.50% as it evaluates the economic impact of tariffs and signals potential cuts starting in July.

The William McChesney Martin Jr. building, which houses the Board of Governors of the Federal Reserve System, is seen, Monday, April 7, 2025, in Washington. (AP Photo/Jacquelyn Martin)
The Federal Reserve, which is under construction, is seen, Monday, April 7, 2025, in Washington. (AP Photo/Jacquelyn Martin)
FILE - In this July 31, 2019, file photo, Federal Reserve Chairman Jerome Powell speaks during a news conference following a two-day Federal Open Market Committee meeting in Washington. (AP Photo/Manuel Balce Ceneta, File)

Overview

  • The Federal Reserve kept its benchmark interest rate unchanged at 4.25%-4.50% during its May 7 meeting, citing economic uncertainty from recent tariff policies.
  • Chair Jerome Powell emphasized a cautious 'wait-and-see' approach to assess how tariffs may influence inflation and employment trends.
  • First-quarter GDP contracted by 0.3%, driven by a surge in imports ahead of tariff implementation, while April saw steady job growth with 177,000 jobs added and a 4.2% unemployment rate.
  • Market expectations for rate cuts have shifted to July, with the CME FedWatch tool showing only a 3% probability of a cut at this meeting.
  • President Trump has publicly pressured Powell to lower rates and criticized his leadership, though Trump recently stated he does not plan to remove Powell before his term ends in 2026.