Federal Reserve Holds Rates Amid Increased Economic Uncertainty

The Federal Reserve decided to keep its key interest rates unchanged in early May 2025, maintaining a range between 4.25% and 4.5%, a move widely anticipated by markets. Fed Chair Jerome Powell highlighted increased economic uncertainty driven by factors such as persistent inflation above the 2% target, the impact of tariffs from the ongoing trade war, and contradictory macroeconomic signals. Despite these risks, Powell emphasized that the U.S. economy remains resilient with low unemployment and solid labor market conditions. The Fed's cautious, wait-and-see approach reflects concerns about both inflation and employment, with the central bank prepared to adjust its policies if economic risks materialize. Market reactions were mixed, with major indices showing divergence and increased volatility, particularly in tech stocks sensitive to credit costs. Overall, the Fed acknowledged the complexity of the current environment, including trade policy uncertainties and slowing growth, and signaled continued monitoring of economic data before making further decisions.