The Federal Open Market Committee announced today that it will hold the target range for the federal funds rate at 4.25%-4.5%. The FOMC also said it has judged that the risks of higher unemployment and higher inflation have risen.
The FOMC last adjusted the federal funds rate in December 2024, lowering the target range by 25 basis points. In a statement, the committee said that while swings in net exports affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. Still, inflation remains somewhat elevated, it said.
Federal Reserve Chairman Jerome Powell noted in a press conference that the Trump administration’s tariffs have so far been significantly larger than anticipated, but those policies are still evolving.
“If the large increases in tariffs that have been announced are sustained, there are likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment,” Powell said.
However, he added that in terms of setting monetary policy, the FOMC will take a wait-and-see approach.
“The economy has been resilient. It is doing fairly well,” Powell said. “Our policy is well-positioned. The costs of waiting to see further are fairly low, we think. So that’s what we are doing.”
