US Fed pauses rate cuts again says ‘great deal of uncertainty’ over Trump's tariffs

US Federal Reserve Chair Jerome Powell on Wednesday warned that US President Donald Trump's escalating and uncertain tariff policies could force the central bank into a difficult position where its key objectives, low inflation and maximum employment, might come into conflict. “I think there's a great deal of uncertainty about, for example, where tariff policies are going to settle out and also when they do settle out, what will be the implications for the economy,” Powell said at a press conference. “We may find ourselves in a challenging scenario in which our dual mandate goals are in tension,” he added, referring to the Fed’s responsibility to balance price stability and job growth. The Federal Reserve left interest rates unchanged for a third consecutive meeting, holding them at 4.25% to 4.5%.

The decision was unanimous, reflecting growing concern over the economic impact of Trump’s trade moves, especially the inflationary pressure from new tariffs and the risk of a slowdown in hiring. Wall Street stocks closed higher following the Fed's decision. Since March, the Trump administration has imposed sweeping trade measures, including a 10% universal tariff and a punitive 145% minimum tariff on most Chinese goods.

In April, additional levies were introduced on dozens of other trading partners, only to be paused until July to allow time for renegotiation. The White House has called this move “liberation day” for American trade, sparking weeks of turbulence in financial markets. Trump has said these tariffs will remain “for now,” despite planned US-China trade talks in Switzerland. “We were losing a trillion dollars a year, now we’re not losing anything,” Trump claimed during the swearing-in of Ambassador David Perdue.

Asked whether he would lower tariffs to encourage talks, Trump bluntly responded, “No.” The policy volatility, announcing and then walking back tariffs, has rattled markets. According to The New York Times, the whiplash from Trump’s decisions has injected heightened uncertainty into the Fed’s economic outlook. “All the hard data are backward looking,” said Rodney Ramcharan, a former Fed economist. “And all the soft data…look pretty bad.” “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said. However, he acknowledged that the Fed is struggling to gauge how tariffs might shape the economy. “It's really not at all clear what it is we should do,” he said, dampening speculation that the Fed might cut rates at its next meeting in June. Trump has frequently lashed out at Powell and the Fed for not easing monetary policy, despite surging inflation risks. Powell, however, insisted the Fed’s work is unaffected by political pressure: “We are always going to consider only the economic data, the outlook, the balance of risks, and that’s it.” CNN reported that Powell suggested the outcome of upcoming trade talks could shift the economic landscape significantly or not at all, depending on how negotiations evolve.