Wed, 07 May 2025

Wed, 07 May 2025 Fed holds rates because of tariff 'uncertainty'

The Federal Reserve said Trump's barrage of tariffs were generating too much uncertainty to predict its next moves.

* The Federal Reserve has kept interest rates unchanged, despite pressure from President Trump to lower borrowing costs.
* Fed Chairman Jerome Powell said the uncertainty created by Trump's tariffs makes it unclear what the bank should do next.
* The economic fallout from the tariffs could lead to rising inflation, slower economic growth, and higher unemployment, according to Powell.
* The bank typically cuts rates when the economy is struggling and raises them when prices rise too quickly. However, the tariffs have complicated its decision.
* Powell said it's "not at all clear" what the Fed should do and that there's "so much uncertainty".
* The Fed's decision marks the third in a row without action, with the key lending rate remaining around 4.3%.
* Powell believes the talks between US and Chinese officials could change the economic picture "materially", but it's unclear how.
* Despite some economic indicators showing weakness, such as the first quarter GDP decline, the Fed thinks the economy is doing fine for now.
* The bank will wait and see how things evolve before making a decision on interest rates.
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