The Federal Reserve has opted to keep U.S. interest rates unchanged for the third consecutive meeting, maintaining the federal funds target range at 4.25% to 4.5%. This decision comes amid heightened concerns among policymakers that President Donald Trump’s tariffs could ignite a new wave of inflation while also threatening job growth.
The Federal Open Market Committee, which sets monetary policy, noted in its latest statement that “uncertainty about the economic outlook has increased further,” and warned that the risks of both higher unemployment and higher inflation have grown since its previous meeting in March.
Fed Chair Jerome Powell addressed the press following the announcement, emphasizing that the central bank faces a delicate balancing act as it seeks to fulfill its dual mandate of maximum employment and stable inflation. While recent economic indicators have shown resilience – such as robust job growth in April and continued expansion in consumer spending – Powell cautioned that the effects of the tariffs could challenge both sides of the Fed’s mandate.
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“It may well. It just hasn’t shown up yet,” Powell said, referring to the possibility of economic deterioration. “Businesses and households very broadly are concerned and, you know, postponing economic decisions of various kinds, and, yes, if that continues, and nothing happens to alleviate those concerns, then you would expect that to begin to show up in economic data. It wouldn’t maybe show up overnight. But it would show up over weeks and months. And that may be what happens. But it hasn’t happened yet.”
The Fed has not lowered borrowing costs since December and has signaled it will remain on pause as it monitors the impact of tariffs and other economic developments. Inflation, as measured by the Fed’s preferred personal consumption expenditures price index, remains above the 2% target, while unemployment has held steady at low levels.
Despite this, consumer sentiment has declined sharply, and businesses have expressed deep concern about making hiring and investment decisions in the face of ongoing trade policy uncertainty.
President Trump has continued to advocate for lower interest rates, especially after strong job growth was reported in April, but the Fed remains cautious. Powell reiterated that the central bank is in no rush to change policy and will “await further clarity” before making any adjustments.
He also acknowledged that the situation could shift quickly if there are changes in tariff policy, with upcoming talks between the U.S. and China offering a potential turning point. “There are things that can happen that will change that narrative. I mean, they haven’t happened, but it’s possible to imagine,” Powell noted. “It’s still a healthy economy, albeit one that is shrouded in some very down, deep sentiment on the part of people and businesses.”
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
