This decision aligns with market expectations and reflects the central bank’s cautious approach in navigating the complex interplay between inflationary pressures and potential economic slowdown.
“Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen,” it said in a statement, noting that “swings in net exports” did not appear to have affected economic activity.
The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities, it said.
In a statement released after the meeting, Fed said uncertainty about the economic outlook has increased further and also the risks of higher unemployment and inflation have risen. “The rate setting committee is attentive to the risks to both sides of its dual mandate.”
In assessing the appropriate stance of monetary policy, Fed will continue to monitor the implications of incoming information for the economic outlook.Fed emphasized the importance of a data-driven approach, stating that the central bank will continue to monitor economic developments closely. Last month, the US president imposed steep tariffs on Chinese imports and set a 10% baseline tariff on goods from most other countries, triggering weeks of market volatility.
The White House also raised tariffs on several other trading partners but delayed implementation until July to allow time for renegotiating existing trade deals.
Meanwhile, recent data signals a potential economic contraction in Q1, even as unemployment remains near historic lows and inflation trends closer to the Federal Reserve’s 2% target.
Uncertainty around tariffs has made US households more pessimistic about the economy and could affect their long-term plans for purchases. That uncertainty has helped fuel a surge in imports ahead of potentially more severe tariffs ahead.
The US trade deficit soared to a record $140.5 billion in March as consumers and businesses alike tried to get ahead of tariffs that went into effect in April and others that have been postponed until July. Last week, the US government reported the economy shrank at a 0.3% annual pace during the first quarter of the year because of a surge in imports.
Some companies say they’re already seeing impacts to their business from the uncertainty created by tariffs.
