The US Federal Reserve on Wednesday kept interest rates unchanged for a fourth straight meeting but made notable adjustments to its policy statement, reflecting heightened worries over the economic fallout from President Donald Trump’s aggressive tariff measures.
Holding the benchmark rate steady at 4.25–4.5 percent, the Fed introduced fresh wording pointing to the effects of trade-related turbulence. “Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,” the statement read. This marked the central bank’s first explicit reference to export data during the current policy cycle — an acknowledgment of the intensifying trade war.
Growth Holds Steady, But Tariff Threats Cloud Outlook
The phrase “solid pace” has appeared in every Fed statement since January 2024, including this one, despite last week’s GDP figures showing the first economic contraction in three years. More strikingly, the Fed cautioned that “uncertainty about the economic outlook has increased further” and that “risks of higher unemployment and higher inflation have risen,” signaling growing fears of stagflation — the rare combination of sluggish growth and elevated inflation.
Fed Chair Jerome Powell, addressing the press after the decision, openly pointed to trade tensions as a drag on confidence. “Surveys of households and businesses… reported a sharp decline in sentiment and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns,” Powell noted. He added, “It remains to be seen how these developments might affect future spending and investment in the labor market.”