US Federal Reserve Policy Meet: Powell Holds Interest Rates at 4.3% Despite Political Pressure

On Wednesday, May 7, the U.S. Federal Reserve chose to leave its benchmark interest rate unchanged at 4.3%, despite the mounting pressure from President Donald Trump to cut borrowing costs. This marks the 3rd consecutive meeting with no rate change, following a series of three cuts in late 2024.

Despite the pause, economists and market analysts widely expect the Fed to implement 3 or 3 rate cuts in 2025. However, these projections have been complicated by President Trump’s broad tariffs on imported goods, which have injected significant volatility and ambiguity into the U.S. economic forecast.

Unusual Dual Threat: Inflation and Unemployment

In a rare scenario, the Federal Reserve is facing simultaneous concerns over rising inflation and increasing unemployment, typically opposing forces. Economists attribute this dual threat to the new tariffs, which are expected to drive up consumer prices by making imports more expensive and simultaneously pressure businesses to cut jobs due to escalating input costs.

Powell Takes on US Fed Policy

During a press conference following the release of the policy statement, Federal Reserve Chair Jerome Powell emphasised that the current interest rate level allows policymakers to adopt a cautious “wait and see” approach regarding the economic effects of the new tariffs. He acknowledged that the outlook remains highly uncertain, making it premature for the Fed to commit to any specific course of action.

“Depending on how the situation unfolds, we might lower rates, or we might choose to maintain our current stance—we simply need more clarity before making any decisions,” Powell explained.

Also Read: India Proposes Zero Tariffs on US Steel and Auto Parts in Trade Discussions

Conclusion

Despite the mounting pressure from President Donald Trump to cut borrowing costs, the US Federal Reserve has decided to kept interest rates unchanged for the 3rd consecutive policy meeting.

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