The central bank will hold steady amid economic uncertainty driven by tariffs.<\/p>\n
The US Federal Reserve has kept interest rates unchanged, brushing off President Donald Trump\u2019s demands to lower borrowing costs, and said that the risks of higher unemployment and higher inflation have risen.<\/p>\n
The Central Bank kept its benchmark rate at 4.25 percent to 4.5 percent, where it has been since December, after cutting it three times in a row at the end of last year. Its vote to hold rates steady was unanimous.<\/p>\n
In a statement, the Fed said that \u201cuncertainty about the economic outlook has increased further\u201d, as it justified keeping rates consistent despite pressure from the White House.<\/p>\n
Many economists and Wall Street investors still expect the Fed will reduce rates two or three times this year, but the sweeping tariffs imposed by Trump\u00a0have injected a tremendous\u00a0amount of uncertainty into the US economy\u00a0and the Fed\u2019s policies.<\/p>\n
It is unusual for the Fed to say that the risk of both prices and unemployment have increased. But economists say that is the threat created by Trump\u2019s sweeping tariffs. The import taxes could both lift inflation by making imported parts and finished goods more expensive, while also raising unemployment by causing companies to cut jobs as their costs rise.<\/p>\n
The economy overall has \u201ccontinued to expand at a solid pace\u201d, the Fed said in a policy statement, attributing a drop in first-quarter output to record imports as businesses and households rushed to front-run new import taxes.<\/p>\n
The Fed said that it was also \u201cstrongly committed to supporting maximum employment and returning inflation to its 2 percent objective.\u201d<\/p>\n
The Fed said that one of the driving factors behind its decision is the state of the labour market, as well as \u201cinflation pressures and inflation expectations, and financial and international developments.\u201d<\/p>\n