Fed Holds Rates Steady at 4.25%–4.50%, Avoids Cut

Quick overview

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Faced with a complex economic landscape marked by mixed signals, uncertain inflationary pressures, and heightened political uncertainty, the Federal Reserve has decided to leave interest rates unchanged.

The Fed held rates steady in the 4.25%–4.50% range, choosing not to implement a cut, while noting that uncertainty surrounding the economic outlook has increased. The committee also warned of rising risks of both higher unemployment and elevated inflation.

Federal Reserve Economic Outlook

At the same time, officials indicated that economic activity continues to expand at a solid pace, despite net exports weighing on some of the data. They stated that the unemployment rate has “stabilized at a low level” and that labor market conditions remain strong. However, inflation remains somewhat elevated.

The direction of monetary policy will depend on how these risks evolve—or, in the more difficult scenario, whether inflation and unemployment rise simultaneously, forcing the Fed to prioritize which threat to address through its policy decisions.

A weakening labor market would strengthen the case for interest rate cuts, while higher inflation would require the Fed to maintain a more restrictive stance.

With no change in policy and no updated economic projections released, attention now turns to Fed Chair Jerome Powell, who is expected to comment on the meeting and the outlook in a press conference.

European Markets

Global stocks held on to most of their recent gains on Wednesday, while oil prices rose following news that top trade officials from the U.S. and China are scheduled to meet over the weekend.

However, the dollar fell for a fourth consecutive session, and European stocks pulled back amid cautious sentiment over the chances of a tariff deal ahead of the Fed’s rate decision.