WASHINGTON (AP) — The Federal Reserve kept its key interest rate unchanged Wednesday, brushing off President Donald Trump’s demands to lower borrowing costs, and said that the risks of both higher unemployment and higher inflation have risen, an unusual combination that puts the central bank in a difficult spot.
The Fed kept its rate at 4.3% for the third straight meeting, after cutting it three times in a row at the end of last year. Many economists and Wall Street investors still expect the Fed will reduce rates this year, but the sweeping tariffs imposed by Trump have injected a tremendous amount of uncertainty into the U.S. economy and the central bank’s policies.
During a press conference after the release of the policy statement, Chair Jerome Powell underscored that the tariffs have dampened consumer and business sentiment but have yet to noticeably harm 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.”