Federal Reserve Keeps Rates Unchanged, Cites Rising Economic Uncertainty

The Federal Reserve announced on May 7 that it would maintain the target range for the federal funds rate at 4.25% to 4.50%, in line with market expectations. This marks the third consecutive meeting since January and March this year where the Federal Reserve has decided to keep interest rates unchanged.

The Federal Open Market Committee, the Federal Reserve's decision-making body, stated in its declaration that the unemployment rate in the United States has remained stable at a relatively low level in recent months, and the labor market remains robust. However, inflation is still "at a high level to some extent." Following the addition of the phrase "economic uncertainty has increased" in the March statement, the May statement further escalated this concern, noting that "economic uncertainty has further increased." Additionally, the Federal Reserve pointed out that "the risks of rising unemployment and inflation have increased," a statement not present in previous declarations, reflecting the Federal Reserve's growing concern about the latest economic situation.

Federal Reserve Chairman Jerome Powell reiterated during a press conference that the Federal Reserve is not in a hurry to act and does not believe that preemptive rate cuts are necessary to mitigate the impact of tariff policies. Regarding the dilemma of "rising unemployment and inflation," Powell stated that the risks of rising unemployment and inflation have intensified. It is currently unclear which risk is more concerning. It is too early to draw conclusions. Both unemployment and inflation risks need to be monitored simultaneously, and a choice may have to be made between them.

When asked if the Federal Reserve would need a long time to understand the situation, Powell emphasized, "I think we don't know." He reiterated his previous statement that the Federal Reserve would not rush to cut rates. Regarding the prospect of rate cuts, Powell said that in the future, there may be situations suitable for rate cuts or maintaining the status quo. It is not possible to make predictions at this time, and it will have to wait until June.