• The Federal Reserve said Wednesday it is keeping its benchmark interest rate unchanged while officials further study the economic impact of President Donald Trump’s sweeping tariffs.
• In a post-meeting press conference, Fed Chair Jerome Powell emphasized that the US economy is currently healthy but that tariffs will materially affect its trajectory.
• For that reason, Powell said the Fed can afford to be patient and not rush to adjust rates.
Our live coverage of the Federal Reserve rate decision has ended. Read more here.
US stocks ended the day higher as the Federal Reserve held its benchmark interest rate steady, matching expectations, and Fed Chair Jerome Powell said a “great deal of uncertainty” remains about the implications of President Donald Trump’s tariff policy.
The Dow closed higher by 285 points, or 0.7%. The S&P 500 gained 0.43% after fluctuating between gains and losses. The Nasdaq Composite gained 0.27% after spending most of the day in the red before surging higher in the afternoon.
Investors had widely expected the Fed to hold rates steady. Fed Chair Powell in remarks said the central bank does not need to be in a hurry to adjust its monetary policy.
“We think right now the appropriate thing to do is to wait and see how things evolve,” Powell said. “There’s so much uncertainty.”
The yield on the 10-year Treasury note edged lower to 4.28%. The US dollar slightly strengthened against other major currencies.
“The Fed is in a tough spot as the size and magnitude of tariffs are still evolving,” said Terry Sandven, chief equity strategist at US Bank Wealth Management Group. “This implies that another round of economic [data] releases will help shape further Fed action.”
Looking ahead, traders expect a 76.8% chance the Fed holds rates steady again at its next decision in June, up from a roughly 69% chance yesterday and just a 33% chance one week ago, according to the CME FedWatch tool.
“The wildcard is that tariff policies continue to change rapidly and with them the economic outlook,” said Bill Adams, chief economist at Comerica Bank.
“Greed” was the sentiment driving markets for the third day in a row, according to CNN’s Fear and Greed index. The index was staunchly in “extreme fear” and “fear” since the end of February before surging into “greed” this month.
Federal Reserve Chair Jerome Powell pushed back Wednesday on recent claims that the central bank strayed too far from its mission by seeking an “inclusive” maximum employment goal when its framework was revised in 2020.
In an April opinion piece in the Wall Street Journal, former Fed Governor Kevin Warsh (whom CNN has reported is on President Donald Trump’s shortlist to eventually replace Powell), criticized the Fed for straying into “politically charged issues” such as climate change and social equity. Warsh reupped claims from some economists that the broader employment goal possibly slowed the Fed’s response to surging inflation post-pandemic.
Powell, when answering a question on the Fed’s involvement with climate change policies and “inclusion,” said the central bank’s role on climate is a “very, very narrow one” that involved one “climate stress analysis.”
On the “inclusion” claims, Powell argued that the criticisms are likely a misinterpretation.
“We never targeted any unemployment rate for individual racial or demographic groups, what we said was that maximum employment was a ‘broad and inclusive goal,’” he said Wednesday. “What we meant by that was we are going to consider the totality of the country as we look at our maximum employment goal.”
“Of course, we were never going to target any individual group with that; but I think some people wanted to hear it that way. But that’s not at all what we meant.”
There’s no rule saying the Fed chair and president need to be pals. And no one is holding their breath for Jerome Powell and Donald Trump to mend ties after the president has repeatedly berated and threatened to fire Powell.
The Fed chief, for his part, said Wednesday he has “never asked for a meeting with any president” and “never will.” It’s not what a Fed chair does, he said.
“Although maybe some have done so, I have never done so. And I can’t imagine myself doing that,” Powell said.
President Donald Trump’s trade war risks massive disruptions to the supply chain, potentially raising prices and creating shortages within weeks. In response to a question from CNN’s Matt Egan, Fed Chair Jerome Powell said Wednesday that the Fed has limited tools to address those potential problems.
“I mean, we don’t have the kind of tools that are good at dealing with supply chain problems,” Powell said. “We don’t have that at all. That’s a job for the administration and for the private sector more than anything.”
Powell said, in theory, the Fed could lower interest rates to boost demand — but “that would be a very inefficient way to try to fix supply chain problems.”
Supply chain experts warn that warehouses stocked with goods from China from before the 145% tariffs went into place are running dry, and trade has all been halted between the two countries. Soon, American consumers could notice some items will cost more — or won’t be available at all.
Powell noted that prices aren’t rising just yet but the Fed is monitoring the situation.
“We don’t see the inflation yet,” Powell said. “We are, of course, reading the same stories and watching the same data as everybody else.”
As if there weren’t already enough riding on the Trump administration’s ongoing trade negotiations, Federal Reserve Chair Jerome Powell just injected even more urgency.
“We are entering a new phase where the administration is entering into beginning talks with a number of our important trading partners and that has the potential to change the (economic) picture materially or not,” he said on Wednesday at a post-meeting press conference.
Powell’s comments come ahead of a high-stakes meeting between the US and China in Switzerland this weekend as a rapidly escalating trade war continues to threaten the two largest economies in the world.
The Trump administration is also considering nearly 18 other trade proposals: Treasury Secretary Scott Bessent earlier Wednesday said some are in “advanced” stages.
US stocks bounced around on Wednesday afternoon as investors assessed Federal Reserve Chair Jerome Powell’s remarks about the outlook for the economy after the Fed held rates steady, matching expectations.
The Dow was up 325 points, or 0.8%, after briefly sliding as the decision to hold rates steady was announced. The S&P 500 was up 0.3% after shifting between gains and losses. The Nasdaq Composite was down 0.1%, though off its lowest levels of the day.
“I don’t think we can say, you know, which way this will shake out,” Powell said. “I think there’s a great deal of uncertainty about, for example, where tariff policies are going to settle out and also when they do settle out, what will be the implications for the economy, for growth and for employment.”
Kevin Gordon, senior investment strategist at Charles Schwab, said Powell’s “continuous mention of not knowing the impacts of tariffs emphasizes how hamstrung the Fed is right now.”
“The economy was in a solid place before the tariff turmoil and the hard data have continued to look resilient, which means the Fed can stay on hold for longer,” Gordon said. “Even though he didn’t give specific guidance about a future rate cut, his language suggests that the next cut is quite far down the road.”
The yield on the 10-year Treasury note hovered around 4.28%. The US dollar index, which measures the dollar’s strength against six major foreign currencies, gained 0.4%.
“We don’t have to be in a hurry,” Powell said. “The economy has been resilient. It is doing fairly well. Our policy is well positioned. The costs of waiting to see further are fairly low, we think.”
“The wait for data to assess the health of the economy continues,” said John Ingram, CIO and partner at Crestwood Advisors.
The Federal Reserve’s key overnight lending rate affects interest rates throughout the economy. Since the Fed on Wednesday decided not to lower that rate, you can still earn a very healthy yield on your cash.
That’s good news since economists believe inflation — which came in at 2.3% in March — will be going up this year as a result of the tariffs. Joe Brusuelas, chief economist at RSM US, told CNN’s Alicia Wallace he expects both headline and core inflation to top 4% later this year.
So you’ll want to look for returns on your cash that can match or beat that expectation.
Here are some options for savings you need to access easily or hold on to for a while.
Consumer sentiment is falling like a rock, and businesses are telling the Fed that they’re deeply concerned about hiring and investing in an uncertain environment because of tariffs. Federal Reserve Chair Jerome Powell said the economy could get worse, even though it remains healthy today.
“It may well. It just hasn’t shown up yet,” Powell said at a press conference Wednesday. “Businesses and households very broadly are concerned and, you know, postponing economic decisions of various kinds, and, yes, if that continues, and nothing happens to alleviate those concerns, then you would expect that to begin to show up in economic data. It wouldn’t maybe show up overnight. But it would show up over weeks and months. And that may be what happens. But it hasn’t happened yet.”
Powell noted that the narrative could change if tariff policy changes. The United States and China are meeting this weekend to discuss a de-escalation of the trade war, and the Trump administration has teased potential trade deals with some allies.
“There are things that can happen that will change that narrative. I mean, they haven’t happened, but it’s possible to imagine,” Powell said. “It’s still a healthy economy, albeit one that is shrouded in some very down, deep sentiment on the part of people and businesses.”
The Federal Reserve and the stock market had expected lower rates this year as the economy slows down. Tariffs could throw a wrench in those gears, Fed Chair Jerome Powell said Wednesday, declining to commit to any rate cuts in 2025.
“It’s going to depend,” Powell said. “I think you have to just take a step back and realize, this is why we are where we are. You know, we are going to need to see how this evolves.”
Powell said there are cases in which it would be appropriate for the Fed to cut rates this year — but there are cases in which it wouldn’t.
“And we just don’t know until we know more about how this is going to settle out and what the economic implications are for employment and for inflation, I couldn’t confidently say that I know what the appropriate path will be,” Powell said at a news conference following the central bank’s latest policy decision.
Although Powell said tariffs won’t change the Fed’s mission to keep unemployment and inflation low, they could complicate it.
The Federal Reserve received a lot of criticism across the political spectrum for waiting until September’s monetary policy meeting last year to begin cutting interest rates for the first time since 2020.
At that meeting, the central bank cut rates by a half point, rather than the more typical quarter-point cut. Many economists speculated that the larger cut was to make up for lost time as the labor market showed more signs of weakening. Fed Chair Jerome Powell previously denied that was the case.
On Wednesday he repeated that the cut was not a preemptive cut to stave off further deterioration in the economy. However, he did say that the central bank may have been “a little late” to begin lowering rates.
Federal Reserve Chair Powell did not dance around the big tariff question.
He kicked off the post-meeting presser, telling reporters: “The tariff increases announced so far have been significantly larger than anticipated.”
“If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” Powell added.
The rise in inflation, he said, could be “short-lived, reflecting a one-time shift in the price level,” he cautioned. But it’s equally possible inflation could prove more persistent, he said. All that will depend on the size of tariffs and how long its effects take to be felt throughout the economy.
The uncertain nature of Trump’s on-again, off-again tariffs clouds the Fed’s outlook, Powell said, but if they remain historically high, then the Fed could have trouble keeping both unemployment and inflation low.
“What looks likely, given the scope and scale of the tariffs, is that we will see, certainly the risks to higher inflation and unemployment have increased,” Powell said. “And if that’s what we do see and if the tariffs are ultimately put in place at those levels, which we don’t know, then we won’t see further progress toward our goals.”
Here’s what investors are saying about the Fed’s decision to hold rates steady:
Minutes before the Federal Reserve announced its decision to hold interest rates unchanged, President Donald Trump signaled that the 145% tariff he placed on most imports from China is here to stay — for now.
When asked in the Oval Office on Wednesday whether he was open to pulling back the historically high tariffs to get China to the negotiating table, Trump replied simply with: “No.”
US stocks pulled back slightly after Trump’s response and have continued to drop since the decision was released at 2 p.m. ET.
Trade between China and the US has essentially ground to a halt since a tit-for-tat tariff escalation between the two countries began in March. However, Trump’s top trade officials will meet with their Chinese counterparts this week for the first time.
Federal Reserve Bank of Kansas City President Jeffrey Schmid, who has voting power on the central bank’s decisions this year, was absent from this week’s two-day policy meeting.
A spokesperson said Schmid isn’t attending because of a recent death in the family. In accordance with Fed rules, Minneapolis Fed President Neel Kashkari voted instead on the Fed’s decision at this meeting.
The Federal Open Market Committee is the Fed group that sets monetary policy, consisting of the seven members from the Fed’s Board of Governors and every president from the Fed’s 12 regional banks, in addition to other high-ranking officials. All members of the Fed’s board and the New York Fed president always get to vote on policy moves, but only four other regional Fed presidents are able to cast a vote, with those turns rotating every year.
The regional Fed presidents with voting power this year are Austan Goolsbee of Chicago, Susan Collins of Boston, Alberto Musalem of St. Louis and Schmid.
The Federal Reserve’s monetary policy statement is screaming stagflation — the combination of significantly slower economic growth and rising inflation.
The statement from this month’s meeting was updated to include a new line stating, “The risks of higher unemployment and higher inflation have risen.”
While many economists would agree that current economic conditions aren’t full-fledged stagflation, it’s clear Fed officials see the risks of that rising.
Recent economic data as well as comments from Fed officials (including Powell) hasn’t helped quiet those concerns.
For instance, last week the Commerce Department reported the US economy contracted for the first time since 2022 as tariffs — both those in effect and ones being considered by the Trump administration — weighed on businesses.
“The level of the tariff increases announced so far is significantly larger than anticipated,” Powell said at an event last month, adding that the lingering uncertainty around tariffs could inflict lasting economic damage. He also warned that tariffs will likely lead to higher prices, but it remains to be seen whether that will be a one-time increase or fuel higher inflation, he said.
The Federal Reserve’s latest policy statement noted that the risk of higher unemployment and higher inflation have both risen, in a stunning nod to the growing threat of stagflation as President Donald Trump carries on with his erratic trade war.
“The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen,” the statement said, a phrase that was not in the previous statement.
The Fed also tweaked the opening paragraph of its statement describing economic conditions, which highlighted the impact of tariffs, saying there have been “swings in net exports.” But, like the previous statement, it stated that the US economy “has continued to expand at a solid pace.”
The Fed’s previous statement from March noted that uncertainty had grown, but the Fed’s latest one said it “has increased further.”
US stocks gave up gains on Wednesday afternoon as the Federal Reserve announced its decision to hold rates steady.
The Dow was up 40 points, or 0.1%, after rising as much as 400 points before the Fed’s decision was announced. The broader S&P 500 fell 0.3%, dipping into the red. The tech-heavy Nasdaq Composite slid 0.9%.
The Fed’s decision to hold rates steady was in line with investors’ expectations. The central bank in a statement said that “risks of higher unemployment and higher inflation have risen,” highlighting the rising concern about stagflation.
The yield on the 10-year Treasury fell to 4.26% as investors snapped up government bonds.
“Uncertainty about the economic outlook has increased further,” the Fed said in a statement.
Investors will be focused on Fed Chair Jerome Powell’s remarks at 2:30 p.m. ET.
“The market is going to be hanging on every word from Fed Chair Powell,” Paul Donovan, chief economist at UBS, said during a Wednesday media event, adding that there is a “hypersensitivity” to Powell’s remarks given just how uncertain the economic outlook is.
“What this all comes down to is what Powell says,” said Brett Bernstein, CEO and co-founder at XML Financial Group.
The Federal Reserve’s decision to keep rates unchanged for the third meeting in a row was unanimous. This comes after two Fed officials dissented to majority decisions, each at different meetings, last year.
