Key dealers
- The Federal Reserve held the federal funds stable at 4.25% to 4.5% to assess inflation risks from customs.
- Proposed customs customs duties can increase inflation pressure and affect the FED’s interest rate decision.
Federal Reserve contained interest rates Steady on Wednesday at an interval from 4.25% to 4.5% as officials continued to evaluate inflation risks and growing uncertainty produced by Trump’s trading agenda.
The central bank’s decision was in line with market expectations. According to data From the CME Fedwatch tool, the markets had priced in almost 98% probability that prices would remain unchanged at the Fed’s May meeting.
This marks the third break in a row in interest rate cuts since January. The Central Bank had previously lowered interest rates three times by the end of 2024 in response to softening employment data and facilitating inflation.
The latest political attitude comes on the heels on the cooling price pressure and continued labor market strength. In March, the Consumer Price Index (CPI) fell 0.1% on a monthly basis, while annual inflation decreased to 2.4%, a decrease from 2.8% in February.
At the same time, April saw solid job gains, which reinforced the resilience of the economy despite uncertainty about Trump’s customs.
The combination of moderate inflation and robust employment supported the Fed’s choice to keep interest rates steady.
The Fed’s political statement said that the latest indicators indicate that economic activity has continued to expand at a solid rate, where labor market conditions remain strong and unemployment stabilizes at low levels. However, it noted that inflation remains somewhat elevated and the uncertainty about the economic outlook has increased further.
The Committee said that the risks of both higher unemployment and higher inflation have increased and emphasized that future decisions will be due to incoming data and the developing balance in the risks. It also confirmed its commitment to reduce the balance sheet and achieve its double mandate with maximum employment and 2% inflation.
President Trump has constantly pushed the Fed to lower interest rates, but the latest strong employment tasks have Reduced the chance for an interest rate reduction in June.
The market has shifted its expectation for interest rate cuts, with participants less confident that reductions enter the third quarter. Investors now expect the Fed to start lowering prices in July, with two to three additional reductions calculated at the end of the year.
