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US Fed holds rates steady despite Trump's pressure, flags rising inflation and job market risksThe Fed kept its rate at 4.3% for the third straight meeting, after cutting it three times in a row at the end of last year.By CNBC-TV18 May 8, 2025, 2:02:51 AM IST (Published)2 Min ReadThe US Federal Reserve kept its key interest rate unchanged Wednesday (May 7), brushing off President Donald Trump’s demands to lower borrowing costs, and said that the risks of higher unemployment and higher inflation have risen.

The Federal Reserve held its benchmark interest rate steady at 4.3% for the third consecutive meeting, following three straight cuts late last year. Despite this pause, economists and Wall Street investors still anticipate two to three rate reductions in 2025. However, sweeping tariffs introduced by President Trump have created significant uncertainty around the US economic outlook and the Fed’s next moves.

It’s rare for the Federal Reserve to warn of rising risks for both inflation and unemployment at the same time. But economists say that’s precisely the dual threat posed by President Trump’s sweeping tariffs. The import duties could drive up inflation by making imported goods and components more costly, while also triggering job losses as businesses face higher input costs and scale back operations.

Also Read: US Fed likely to cut rates two to three times this year, says Manulife’s Marc Franklin

As a result, the tariffs have put the Fed in a difficult spot. The Fed’s goals are to keep prices stable and maximise employment. Typically, when inflation rises, the Fed raises rates to slow borrowing and spending and cool inflation, while if layoffs rise, it would reduce rates to spur more spending and growth.

At a press conference after the release of the policy statement, Powell repeatedly said the current policy rate puts Fed officials in a good position to “wait and see” what the ultimate impacts of the tariffs are. At the moment, Powell said, there’s too much uncertainty to say how the Fed will react.

"Depending on how things play out, it could include rate cuts, it could include us holding where we are, we just need to see how things play out before we make those decisions," he said.

Also Read: Fed unlikely to cut rates soon as US economy holds firm, says Ed YardeniContinue ReadingCheck out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsDonald TrumpJerome PowellUS Federal Reserve