Fed Holds Steady on Rates, Takes “Wait and See” Approach

The Federal Reserve unanimously decided to maintain its benchmark Federal Funds Rate at 4.25% to 4.5%, continuing the pause established in January. This widely expected move comes as the Fed acknowledges increased risks to both inflation andunemployment. Remember: The Fed Funds Rate affects the overnight lending rate between banks, influencing broader interest rates throughout the economy, though not directly setting mortgage or long-term rates.

What’s the bottom line?
The Fed remains focused on its dual mandate of price stability and maximum employment. However, these goals may pull policy in opposite directions, especially with new tariffs creating economic uncertainty. Higher inflation typically prevents rate cuts, while economic slowdowns usually trigger them.
Given the uncertain impact of trade policies, Fed Chair Jerome Powell emphasized a cautious approach in his post-meeting press conference: “We think right now the appropriate thing to do is to wait and see how things evolve.” Powell used the word “wait” over twenty times during the Q&A session.
Looking ahead, the Fed will closely monitor upcoming inflation and employment data, as future policy decisions could depend on which risks materialize first.