The Fed's third straight meeting has kept U.S. interest rates on hold as officials stressed growing concerns that Donald Trump's tariffs will trigger new inflation rates and weaken the job market.
"Uncertainty about the economic outlook has increased further," the Federal Open Market Committee said Wednesday, adding that since its last meeting in March, "the risk of higher unemployment and higher inflation has risen."
Fed officials have not cut borrowing fees since December and said they will pause when assessing the impact of Trump’s tariffs on the world’s largest economy.
In recent weeks, several top bankers have said that ongoing tax price pressure will be a top priority. Recent reports suggest that this view has been obtained, which shows that demand in the world's largest economies remains strong at the beginning of the year.
Despite repeated calls from the U.S. president to cut borrowing costs, the Fed maintains its patients’ approach. Trump also launched an attack on Jay Powell and marked him as "Mr. Too late."
The May decision comes after strong non-agricultural payroll data released in April, showing that the U.S. labor market remains firm despite uncertainty caused by the Trump administration’s trade policy.
Jobs' data allowed many economists to lower their expectations for the first Fed's lowered tax rate to September.
Interest rate expectations did not change immediately after Wednesday's Fed decision.
The U.S. Treasury yield rate was inversely proportional, falling to its lowest level of the day. The biennial yield shifted at interest rate expectations, down 0.03 percentage points to 3.76%, indicating that central banks have fewer hawks than traders expected. Stocks also fell to their lowest level on the day, with the S&P 500 falling 0.4% and the Nasdaq Composite down 0.9%.
Trump announced the approval on April 2 that, if enacted, would raise U.S. trade barriers to its highest level in more than a century. A week later, most people paused for 90 days.
Although GDP was signed for the first time in three years in the first quarter, officials attributed it to a distortion caused by tariffs as U.S. businesses want to collect taxes through imports.
"Although net export volatility has affected the data, recent indicators show that economic activity continues to expand," FOMC said.
Powell will meet at 2.30 p.m. Washington time when he is expected to provide clues about the next steps in U.S. lending costs.
"Powell should continue to say what he is talking about - they just want to wait and see how that will go," said Tom Porcelli, a fixed income economist at PGIM. "There is still too much uncertainty around the hits of growth, inflation and the timing of this happening."
"If he continues to bring the news home, I think he will walk away with victory," Porcelli added.