WASHINGTON: The U.S. Federal Reserve kept interest rates untouched on Wednesday, holding its standard rate stable at 4.25% to 4.50%. According to the latest Reuters report, while legislators still anticipate rate cuts in 2025, Federal Reserve Chair Jerome Powell has advised vigilance, cautioning against placing extreme trust in predictions and estimates amid increasing ambiguity, particularly regarding inflation and import costs.
“No one holds these rate paths with a great deal of conviction,” Powell stated in a press discussion after the central bank’s two-day strategy meeting. “They’re all going to be data-dependent.”
Powell sent a clear-cut warning: new import duties recommended by President Donald Trump could kindle a “meaningful” upsurge in inflation in the approaching months. As manufacturers, importers, and sellers grapple over who will suck in the additional outlays, Powell made it evident that at best some of those expenditures will certainly get to consumers.
“Everyone I know is forecasting a meaningful increase in inflation from tariffs,” Powell said. “Someone has to pay—the manufacturer, the exporter, the importer, or the retailer—and ultimately, some of it will fall on the end consumer.”
He further said that without the impending cost shock from tariffs, the Fed might consider slashing rates more willingly.
Slower growth, higher prices, uncertain future
New economic forecasts issued by the Fed depict a more dormant representation than earlier viewpoints. Legislators and officials now assume U.S. economic growth will slow down to 1.4% in 2025, with unemployment growing to 4.5% and inflation concluding the year at 3%, a full percentage point more than the central bank’s 2% objective.
The Fed still predicts a half-point rate cut in 2025, but its attitude on additional decreases has lessened. A one-quarter-point cut is estimated in each of 2026 and 2027, echoing a sluggish, careful approach to monetary easing.
Not everyone, especially policymakers, agrees on the necessity of rate cuts. Of the 19 Fed officials, seven expected no cuts of any kind, highlighting internal conflicts driven by ambiguity over both trade strategy and the resilience of the labor market.
Powell recognised the diverse views, saying it’s “a very foggy time” as the Fed tries to assess how tenacious inflation might be and how strong the job market remains.
Despite growing unemployment prognoses, the Fed noted that labor market circumstances remain compact, with May’s unemployment rate at 4.2%. Powell highlighted the Fed’s approach is to “wait and see” how tariffs influence and inflation burdens progress in the approaching months.
“We’ll make smarter and better decisions if we just wait… to get a sense of what is going to be the pass-through of inflation from the higher import taxes,” he said.
Markets unfazed?
Markets hardly reacted to the declaration. U.S. stock indexes bolted generally flat, and the 10-year Treasury yield was fixed. Futures brokers are still betting that the next rate cut will come immediately after the Fed’s September conference, with another discussion anticipated at the end of the year.
However, President Trump voiced his disappointment during the Fed’s conference, labeling Powell “stupid” and calling for an instantaneous 50-basis-point rate cut, a calculated move typically used in crises. Trump likewise jested about making himself the Fed chair.
“For the time being, we are well-positioned to wait to learn more about the likely course of the economy,” Powell said, stressing the Fed’s willingness to react fast to new statistics.
A waiting game with high stakes
With inflation hazards intensifying and economic progress decelerating, the Federal Reserve is playing with fire and navigating a minefield. While the door to rate cuts remains open, the pathway is narrow and shrouded in indecision and ambiguity. Tariff procedure, global volatility, and political strains are all blurring the economic panorama, leaving the Fed to pause, watch, and gear up for whatever comes next.