Decision follows negative GDP growth in Q1 with persistent inflation and strong jobs growth
The US Federal Reserve Open Markets Committee (FOMC) has decided to hold its overnight interest rate steady at 4.25 to 4.5 per cent. The decision — which had been largely priced in by markets — comes following some extremely mixed datapoints from the US economy.
"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," a press release announcing the decision reads.
GDP fell by -0.3 per cent in Q1, which initially shocked analysts. That drop, however, appears to have largely been a product of import orders surging ahead of the announcement of sweeping tariffs by US President Trump in early April. The US economy added 177,000 jobs in April, too, further complicating the picture.
Consumer confidence is currently at multi-year lows and manufacturing surveys also show deep concern about the impact tariffs may have on the supply of goods.
In addition to his tariff decisions, President Trump has explicitly urged Fed Chair Jerome Powell to cut interests rates. Powell, however, has frequently pushed back against any attempts to compromise the independence of the US Federal Reserve.
"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," the announcement reads. "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."
