The Federal Reserve held its benchmark interest rates steady at 4.25% to 4.5% during its latest meeting, but economists and officials are still grappling with the challenges posed by President Trump’s tariff regime. The economy has shown resilience six months into the trade policy changes, with low unemployment and moderated inflation, but experts warn that this trend may be short-lived.
The Fed is struggling to discern whether the tariffs will lead to sustained inflation or not. Cutting rates too soon could fuel price increases, while waiting too long could damage economic activity and push people out of work. Fed Chair Jerome Powell emphasized the need for data-driven decision-making, stating that the central bank wants to do “efficiently” but is cautious due to ongoing uncertainty.
Labor market concerns are also a factor in the Fed’s deliberations, with some officials pushing for rate cuts to mitigate potential damage. However, others argue that the labor market remains resilient and that a prolonged period of low inflation is unlikely. The White House has announced several trade deals, including with major economies like Japan and South Korea, but final agreements with China, Canada, and Mexico remain elusive.
The ongoing tariff uncertainty adds to the economic mix, making it challenging for the Fed to predict future interest rate movements. Experts warn that unresolved tariff rates could lead to further global economic disruption if not addressed promptly. As the Fed waits for more clarity on the data, economists are left to speculate on the trajectory of the economy and the likelihood of interest rate cuts in the near future.
Source: https://13wham.com/news/nation-world/uncertainty-about-economys-future-is-keeping-rate-cuts-on-hold-jerome-powell-federal-reserve-tariffs-trade-deals-economy-unemployment-recession