The US Federal Reserve has kept its benchmark interest rate unchanged at 4.25 to 4.5 per cent, resisting President Donald Trump’s calls for lower borrowing costs. This marks the fourth consecutive meeting where the central bank has opted to hold rates steady.
In its policy statement, the Fed said economic uncertainty had grown, citing potential risks of both higher inflation and rising unemployment — an unusual combination that analysts link to Trump’s sweeping tariffs on imported goods. These import taxes are expected to drive up prices while also putting pressure on businesses that may respond with job cuts due to increased costs.
Despite holding rates steady, the Fed reaffirmed its commitment to supporting maximum employment and returning inflation to its 2 per cent target. It noted that while the overall economy continues to grow at a solid pace, recent output data showed a slowdown attributed to a surge in imports — a move by businesses and households to beat incoming tariffs.
The central bank’s decision was unanimous, with Fed Chair Jerome Powell stating the current stance gives the Fed flexibility to respond as economic conditions become clearer. “For the time being, we are well-positioned to wait for greater clarity before considering any adjustments,” Powell said, acknowledging a “healthy economy” clouded by cautious sentiment from both consumers and businesses.
The labour market remains a key factor in the Fed’s thinking. A recent jobs report from the US Labor Department showed 177,000 new jobs were added before the tariff announcement, aligning with the year’s trend. However, the more timely ADP report recorded only 62,000 new jobs after the policy shift, highlighting a potential slowdown.
Economist Brian Jacobsen noted that the Fed is clearly weighing both inflation and growth risks equally. “They’re waiting to see how the data unfolds before making any firm move by June,” he said.
Powell also reaffirmed the Fed’s independence, stating that presidential pressure has no bearing on its policy decisions. “I’ve never asked for a meeting with any president and I never will,” he added.
