Federal Reserve Holds Rates Steady Amid Tariff-Driven Uncertainty

Federal reserve

The Federal Reserve kept its benchmark interest rates unchanged Wednesday, citing uncertainty over trade tariffs and geopolitical risks despite signaling two rate cuts by year’s end.

At its latest policy meeting, the Fed held the federal funds rate steady for the fourth consecutive session. In a statement, the central bank said, “uncertainty around the economic outlook has increased.”

The Fed kept its rate at 4.3% for the third straight meeting. It previously cut it three times consecutively at the end of last year. Many economists and investors still expect the Fed will reduce rates this year, but Trump’s tariffs have caused a lack of confidence in the economy and economic policies.

Federal Reserve Chair Jerome Powell noted that persistent tariffs could spark rising inflation, slower growth and higher unemployment. “If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and a rise in unemployment,” he said.

Despite Trump’s public calls for immediate rate cuts—calling Powell “too late”—the Fed resisted, stressing its independence. Powell said policymakers were “in a good position to wait and see,” given mixed data and global instability.

Markets reflected the cautious tone on Wednesday. The S&P 500 ended nearly flat at 5,980.87, the Dow slipped 0.1% to 42,171.66 and the Nasdaq edged up slightly to 19,546.27. Treasury yields remained steady.

Oil prices fluctuated amid fears that Middle East tensions could disrupt supply via the Strait of Hormuz. The Fed noted these geopolitical pressures as part of its risk assessment.

The central bank reiterated expectations for two rate cuts in 2025, pending inflation and employment trends. “There’s just so much that we don’t know,” Powell admitted.

Scroll to Top