From Yahoo Finance: 2025-05-02 14:43:00

The Federal Reserve is likely to keep interest rates steady on Wednesday amid uncertainty over the impact of Trump’s tariffs. Markets expect a rate cut in July. The Fed aims to balance low inflation and high employment, but tariffs could disrupt this balance. Borrowing costs are unlikely to drop soon.

Economists predict Trump’s tariffs will raise prices and hurt employment, challenging the Fed’s mandate to control inflation and joblessness. Recent data showed stable inflation and job growth. Despite this, fears persist about the tariffs affecting the economy negatively. The Fed is monitoring the situation closely.

The Fed is maintaining interest rates higher than usual to combat inflation. The cost of living rose 2.6% and unemployment is at 4.2%. The Fed’s main concern is managing the economy effectively with interest rates. Lowering rates could boost spending but overheat the economy, while raising rates could curb inflation but slow growth.

The Fed faces a dilemma with interest rates, as cutting rates could stimulate the economy but risk inflation. Traders expect rate cuts in July amid economic weakness. For now, the Fed is likely to wait and see how the tariff impact unfolds. The choice between inflation and unemployment will be crucial for the Fed.

Read more: What To Expect From Wednesday’s Federal Reserve Meeting