Fed holds interest rates steady as the central bank weighs impact of Trump tariffs

The Federal Reserve announced on Wednesday that it will maintain its benchmark interest rate, resisting pressure from President Trump to lower borrowing costs. The federal funds rate will remain at 4.25% to 4.5%, where it has been since December. This rate influences what businesses and consumers pay in interest on loans and credit card debt.

Fed chair Jerome Powell expressed concerns about the economic impact of Trump’s tariffs, which could lead to higher inflation and unemployment. Although consumer and business sentiment has dropped, the actual effects of the tariffs have not yet been seen in economic data. Powell stated that the Fed is monitoring the situation closely and will take a wait-and-see approach.

There is a possibility of stagflation, a combination of slow economic growth and high inflation, due to the uncertainty surrounding Trump’s trade policies. The Fed’s decision to hold interest rates steady reflects a cautious approach to the current economic conditions.

Despite pressure from Trump to cut interest rates, the Fed’s statement did not indicate when it might consider easing monetary policy. Economists predict that the tariffs could lead to increased inflation later in the year, potentially prompting the Fed to lower rates.

Overall, the Fed’s decision to maintain interest rates comes as the central bank waits for more clarity on the economic impact of Trump’s tariffs. The focus remains on monitoring inflation, unemployment, and overall economic growth before making any changes to monetary policy.