The Federal Reserve maintained its benchmark interest rate Wednesday, keeping its target at a 4.25% to 4.50% range, noting increased uncertainty about the the economy.
The decision follows a first quarter in which gross domestic product decreased an annualized 0.3%.
"Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated," the Federal Open Market Committee, which sets the target rate, said in a release.
The committee seeks to achieve maximum employment and 2% inflation over the longer run. "Uncertainty about the economic outlook has increased further. 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," according to the statement.
"In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective," the central bank said.
"In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
The FOMC last cut rates in December, trimming the target range by 25 basis points.
At a news conference following the announcement, Fed Chair Jerome Powell said the central bank "in a good place to wait and see," given the economy's resilience and the Fed's moderately restrictive policy. “We feel it’s appropriate to be patient," he said. “We can move quickly when that’s appropriate.”
The Trump administration's tariff policies have raised inflation and unemployment risks, Powell said. “There’s so much uncertainty about the scale, scope, timing and persistence of the tariffs," he said.
While consumer and business sentiment measures are down, the Fed chair said he hasn't seen it appear in the hard economic data yet, and that tariffs haven't yet resulted in economic shocks. Wages are in good shape, large-scale layoffs aren't occurring, the labor market is at or near maximum employment, and inflation has fallen a great deal while running above the Fed's long-term goal, he said.
“We’re in a good place. Our policy’s in a very good place, and the right thing to do is to await further clarity," Powell said.
Credit: Diego M. Radzinschi/ALM
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