US Fed keeps rates unchanged at 4.25–4.5% amid tariff turbulence

The US Federal Reserve has once again hit the pause button on interest rates, keeping the benchmark range steady at 4.25% to 4.5% in its May 7 policy meet. This decision comes as the economy battles two major forces: persistent inflation and an escalating global trade war.

Fed Chair Jerome Powell made it clear—the central bank is in no hurry to cut rates. "Uncertainty is high. Tariffs are pushing up inflation, and economic signals are mixed," Powell said during the press conference. His message was loud and clear: the Fed will wait, watch, and act only when it’s confident about the direction of the economy.

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Economic indicators paint a cloudy picture. While the GDP shrank by 0.3% in Q1 2025, a sign of weakening growth, payrolls rose by 177,000 in April, and consumer spending remains strong. Inflation, measured by the PCE Price Index, was flat in March after a sharp rise in February.

Despite this mixed bag, Powell emphasized the Fed's readiness to act. “If risks emerge that could derail economic goals, we are prepared to adjust policy accordingly,” the Fed stated.

Former New York Fed President William Dudley also weighed in, saying the central bank’s strategy now is about risk management—not just reacting to the numbers but preparing for potential shocks. “The Fed doesn’t know where tariffs will land or how they’ll impact growth versus inflation,” Dudley explained.

Wall Street cheered the stability. The S&P 500 rose 0.43%, the Dow jumped 0.70%, and the Nasdaq edged up 0.27%. The market clearly sees a silver lining in the Fed’s cautious optimism.