Fed Expected to Keep Rates Steady Amid Tariff Uncertainty, Inflation Risks

The U.S. economy remains largely stable, with inflation steadily decreasing and unemployment at a historic low of 4.2%, yet Federal Reserve chair Jerome Powell faces uncertainty as the Fed prepares for a two-day meeting to decide on interest rates. President Donald Trump's widespread tariffs raise concerns about potentially higher inflation and slower economic growth in the coming months, complicating the Fed's decision-making process. Policymakers are expected to maintain the key interest rate at about 4.4%, while quarterly economic projections may indicate an uptick in inflation and unemployment later this year. Economists suggest the Fed might cut rates twice in 2025, but the mixed signals from inflation and unemployment place the Fed in a difficult position, described by economist Diane Swonk as an "uncomfortable purgatory." The Trump administration is pressuring Powell to lower borrowing costs, with President Trump and other officials publicly criticizing Powell for not reducing rates. Typically, lowering the Fed's key short-term rate reduces borrowing costs for consumers and businesses, but the current economic uncertainty due to tariffs has delayed such moves.