The Federal Reserve on Wednesday extended its pause on interest rate cuts as President Trump’s back-and-forth tariffs fuel market volatility and doubts over the US economy.
Central bankers kept their policy unchanged at a target rate between 4.25% and 4.5%, which was reached after a series of three rate cuts in the second half of 2024.
“Uncertainty around the economic outlook has increased,” the Fed said in a note.
Fed officials have indicated they are taking a “wait-and-see” approach to see how heightened trade tensions impact their 2% inflation goal, and whether a relatively healthy labor market begins to show signs of weakening.
Meanwhile, Trump has been calling for the central bank to lower rates immediately after butting heads with Fed Chair Jerome Powell in the past over who has the power to slash rates.
Analysts are largely expecting the Fed to hold off on interest rates for at least the next few months.
There’s so much uncertainty in the economy right now, but what seems clear is that anyone hoping for the Fed to lower rates is going to have to wait at least a few months,” Matt Schulz, chief consumer finance analyst at LendingTree, said in a note.
“That stinks if you’re in the market for a new home, credit card or auto loan, but it is good news for savers,” he added, since high-yield savings accounts will likely stay high for a while.
Ahead of the meeting, Powell maintained that the economy is in “a good place.”
“Wages are growing faster than inflation, and at a more sustainable pace than earlier in the pandemic recovery,” Powell said earlier this month during a speech at the US Monetary Policy Forum, adding that inflation is easing back to 2%.
