The Federal Reserve has decided to keep its key interest rate unchanged, even as it acknowledges the growing risks of both higher inflation and higher unemployment. This decision comes despite calls from former President Donald Trump for lower borrowing costs, highlighting the complex balancing act the central bank faces. Federal Reserve Chairman Jerome Powell addressed these concerns during a news conference following the Federal Open Market Committee meeting on Wednesday, May 7, 2025.
Powell underscored the dual threats—escalating prices and increasing joblessness—that complicate the Fed’s policy decisions.
Fed balances inflationary threats
“This is not a situation we typically face,” Powell stated.
“We are seeing indicators that suggest inflationary pressures are building at the same time that the job market is showing signs of weakening.”
The decision to hold the interest rate steady aims to navigate these uncertain economic waters carefully. Lowering rates could potentially fuel inflation further, but raising them might exacerbate unemployment. Powell added, “Our priority remains to foster maximum employment and stabilize prices, and we are committed to taking the necessary steps to achieve these goals.”
The Fed’s policy-setting committee will continue to monitor economic data closely, with Powell noting that the central bank is prepared to adjust its policies if the outlook either improves or deteriorates.
The next Federal Open Market Committee meeting will be closely watched as investors and analysts look for further signals about the future direction of U.S. monetary policy amid these challenging conditions.
