Questions still surround the impact President Donald Trump’s policy on tariffs will have on the U.S. economy, and Trump himself has been pressuring the Federal Reserve to cut interest rates.
But Fed Chair Jerome Powell and the Fed’s ruling board ignored all the bluster following the board’s meeting this week and left the Fed’s prime interest rate right where it was.
The Federal Reserve kept its key interest rate unchanged at 4.3% Wednesday, saying the risks of both higher unemployment and higher inflation are increasing.
It’s the third straight meeting after which the Fed has declined to lower its rates after cutting it three times in a row at the end of last year. While many economists still expect the Fed to reduce rates this year, the sweeping tariffs imposed by Trump have brought about a good deal of uncertainty, according to a report from The Associated Press.
Powell, speaking at a press conference after the announcement, said the tariffs have dampened consumer and business sentiment, though they haven’t yet done any noticeable harm to the economy. At the moment, Powell said, there’s too much uncertainty to say how the Fed should react to the duties.
“If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and a rise in unemployment,” Powell said. The impacts could be temporary, or more persistent, he added.
“There’s just so much that we don’t know,” he added. “We’re in a good position to wait and see.”
