The Federal Reserve kept interest rates on hold as questions around the global economic outlook mount amid Donald Trump’s erratic rollout of an aggressive trade strategy.
Policymakers at the US central bank cautioned that “the risks of higher unemployment and higher inflation have risen” as they opted to maintain the benchmark interest rate for the third time in a row.
“Uncertainty about the economic outlook has increased further,” they said in a statement.
The US president has repeatedly demanded in recent months that the Fed cuts rates – and even raised the prospect of firing Jerome Powell, its chairperson, before walking back the comments – as Trump’s tariffs plan appeared to knock the US economy.
The Fed has been sitting on its hands for months, however, citing heightened uncertainty. It last cut rates in December, to a range of between 4.25% and 4.5%.
As Trump pushed ahead last month with sweeping tariffs on imported goods from much of the world, Powell cautioned this would probably raise prices and slow growth – despite the administration’s pledges to revitalize the US economy and reduce the cost of living for millions of Americans.
US gross domestic product (GDP) shrank for the first time in three years during the first quarter, raising fears of recession as Trump’s tariffs – and threats of tariffs – cast a shadow over the world’s largest economy.
Asked whether he was trying to take responsibility for stronger parts of the economy, while blaming his predecessor, Joe Biden, for any sign of weakness, Trump told NBC’s Meet The Press: “I think the good parts are the Trump economy, and the bad parts are the Biden economy. Because he’s done a terrible job.”
After Fed policymakers finished their latest two-day meeting on Wednesday, the central bank reiterated in its statement that they would “carefully assess incoming data, the evolving outlook, and the balance of risks” ahead of future meetings.
“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,” the Fed’s rate-setting open market committee said. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
