The Federal Reserve has decided to maintain interest rates between 4.25% and 4.5%, indicating caution due to uncertainty surrounding the Trump administration's tariffs and their impact on the U.S. economy. While Fed Chair Jerome Powell noted the economy's resilience, he acknowledged growing concerns over inflation and consumer spending. Although the Fed anticipates possible rate cuts later in the year, the unpredictable nature of trade policies, including tariffs on imports from China and metals, is complicating the economic outlook and could affect future monetary policy decisions.
The Fed is trying to assess the overall economic effect of those tariffs along with the administration's efforts to curb immigration, lower taxes, slash federal spending and roll back regulations.
We are focused on separating the signal from the noise as the outlook evolves... we do not need to be in a hurry, and are well positioned to wait for greater clarity.
The White House trade policy has sparked considerable uncertainty with tariffs imposed one day and sometimes suspended the next, but the overall economy has remained resilient.
Consumer spending has softened so far this year, however, which could lead to slower economic growth. If that happens, the Fed would face more pressure to lower interest rates.
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