From CNBC: 2025-05-07 14:17:00

The Federal Reserve kept its key interest rate unchanged amid uncertainty over trade policy’s impact on the economy. The statement highlighted rising risks to both employment and inflation. With tariffs potentially causing stagflation, the Fed is being patient as it monitors economic signals and ongoing trade negotiations.

Despite a challenging economic landscape, the Fed is in a good position to calibrate monetary policy. The economy, though showing signs of slowing, has held up fairly well with job growth and unemployment rates remaining stable. Inflation is nearing the Fed’s 2% target, but tariffs may lead to temporary price hikes.

Recent progress in trade negotiations has provided some relief, reversing stock market losses. However, business surveys reveal high anxiety over supplies and pricing due to tariffs. Market pricing shows uncertainty over future Fed actions, with traders expecting three rate cuts this year.

The Fed’s decision to maintain the benchmark rate was unanimous. The fed funds rate affects overnight lending and consumer debt like mortgages and credit cards. As the economy navigates through trade uncertainties, the Fed remains vigilant in balancing full employment and stable prices.

Read more: Fed rate decision May 2025: Fed holds rates steady