Fed Keeps Rates Steady, Warns Tariffs May Slow Growth: As trade tensions rise and economic uncertainty deepens,
The U.S. Federal Reserve faces renewed challenges balancing growth objectives with inflation control.
During its May meeting, the Fed made a widely expected decision to keep interest rates unchanged at 4.50%.
However, what stood out this time was its explicit warning about the potential impact of tariffs on the U.S. economy.

Amid signs of slowing inflation and continued labor market expansion,
All eyes are now on the Fed’s next moves and how they might be influenced by shifting global market dynamics.

Contents

Details

Details

During its May meeting, the Federal Reserve’s Monetary Policy Committee decided
to maintain the federal funds rate at 4.50%, which aligns with market expectations.
This move came amid clear indications that inflation is decelerating, though price pressures remain above the Fed’s target level.

This rate hold follows the first rate cut in September since March 2020.
It was driven by recent economic data showing inflation approaching
the Fed’s 2% target and the labor market holding steady at robust levels.

According to the Fed’s statement, economic activity continues to expand at a solid pace,
despite fluctuations in net exports.
The unemployment rate remains low, and the labor market is relatively stable.
However, the Fed emphasized that inflationary pressures persist, with inflation still exceeding the desired target.

During a press conference, Fed Chair Jerome Powell warned that persistently high tariffs,
particularly those that had been temporarily suspended, could worsen inflation and increase unemployment.
Powell reiterated that the Fed cannot abandon its inflation target, stressing that future policy decisions will be data-driven.

He also noted that the Fed will continue reducing its holdings of government bonds and mortgage-backed securities,
Reaffirming that the current policy stance is appropriate amid growing market uncertainty.

While the U.S. economy continues to add jobs at a strong pace,
Powell highlighted the importance of “waiting before making additional decisions,”
noting that monetary policy will depend on the Fed’s assessment of inflation,
labor market conditions, and growth indicators.

This decision to maintain interest rates is critical for global markets experiencing
increased volatility due to escalating trade tensions.
As such, tariffs are now emerging as a key variable in determining the future direction of U.S. monetary policy.

Fed Keeps Rates Steady, Warns Tariffs May Slow Growth

Fed Keeps Rates Steady, Warns Tariffs May Slow Growth

Related Topics