FOMC Keeps Fed Funds Rate Steady, Citing Rising Risks of Unemployment, Inflation

The Federal Open Market Committee kept the target fed funds rate steady at its current level of at of 4.25% to 4.5%, citing rising risks of unemployment and accelerating inflation.

"Uncertainty about the economic outlook has increased further," policymakers said in a statement released at the end of its two-day meeting Wednesday afternoon. "The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen." 

Fed Chairman Jerome Powell declined to say when policymakers can resume cutting interest rates again, noting that they will need to see evidence of what the impact from President Donald Trump's tariffs on employment and consumer prices. 

President Donald Trump ruled out the possibility that he could pare back his 145% tariffs on imports from China as the Asian country negotiates a deal with the U.S. to ease trade tensions. Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer are expected to meet this week in Switzerland with Chinese Vice Premier He Lifeng on trade. 

"Until we know more about how this is going to settle out and what the economic implications are for employment and for inflation, I couldn't confidently say that I know what the appropriate path will be," Powell said in a press conference after the FOMC meeting. "Our policy is in a good place, so we think we can wait and move when it is clear what the right thing to do is." 

While he acknowledged that "people are feeling stress and concern," he said unemployment hasn't increased and job creation remains solid. 

In a statement released earlier, policymakers noted that recent data signal economic activity has continued to expand at a solid pace even amid the swings in net exports. They also said the unemployment rate has stabilized in recent months at a low level and the labor market continue to be resilient. 

The $S&P 500(.SPX)$   swung between gains and losses after the FOMC decision was released. It closed 0.4% higher after reports that Trump will end the export restrictions on chips, easing concerns over escalating trade war that threatens to fan inflation. The tech-heavy $NASDAQ(.IXIC)$   also wiped losses to close slightly higher.

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