The Federal Reserve signaled Wednesday that it was unlikely to make another interest rate change until it was more clear how President Donald Trump’s economic objectives would impact the labor market and inflation.
The Fed will probably come up with “a number of creative ways to say ‘wait and see,'” according to Wrightson ICAP chief economist Lou Crandall.
The uncertainty around possible tariffs and fiscal policy is so great that “keeping things steady looks like the prudent move,” according to Jefferies analyst Tom Simons.
Fed Chair Jerome Powell stated at his press conference that while there was “no hurry” for the Fed to act, the central bank might decide to do so sooner if there were indications of a worse labor market or positive inflation data.
Fed members ended a streak of three straight rate-cutting sessions when they unanimously decided to hold the benchmark interest rate steady at the conclusion of their two-day meeting.
The Fed reiterated words in a statement that suggested interest-rate hikes might be put on hold for a long time.
Fed policymakers stated, “The economic outlook is uncertain,” and they pledged to monitor for indications of both a weakening labor market and increased inflation.
Interest rates will remain between 4.25% and 4.5% following the Fed’s decision.
In a message posted on his social media network after the meeting, Trump expressed his opinion that Powell and the Fed “failed to stop the problem they created with inflation.” In the same speech, Trump—who appointed Powell but has criticized the Fed chairman—doubled down on campaign pledges to increase energy production and “reignite American manufacturing.”
The central bank’s economic projection remained unchanged. Officials announced two quarter-point cuts in 2025 in December, which were more aggressive than the market had anticipated.
Additionally, Fed officials are unsure of the extent to which their current monetary position is affecting the economy.
Many economists disagree with Powell’s assertion that the policy is restrictive or slowing growth.
The market, however, has taken the Fed’s stance, with many analysts predicting the first drop in June.
But in the realm of interest rates and economists, that’s practically so far off that anything can happen.
Fed governor Christopher Waller, one of the top officials, has stated that if inflation slows down, the Fed may be able to lower interest rates further than anticipated.
According to some economists, the inflation tempest is over.
However, other economists believe that Trump’s immigration and tariff policies will make it more difficult for the Fed to reach its 2% inflation objective, and that the Fed will not be able to lower rates again.
