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Federal Reserve Holds Steady as Trump Tariffs Threaten Economic Stability: The Hard Truth Exposed

by Sham
May 7, 2025
in Finance, Opinion, Politics
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Federal Reserve Holds Steady as Trump Tariffs Threaten Economic Stability: The Hard Truth Exposed
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  • The Federal Reserve kept interest rates steady at 4.25%–4.5% but warned of rising risks to inflation and unemployment.
  • Trump’s tariffs complicate the economic outlook, raising concerns about potential stagflation in the coming months.
  • Despite pressure from Trump to cut rates, Fed Chair Powell signaled that rate cuts are unlikely in the near term.

The Federal Reserve kept its benchmark interest rate unchanged at 4.25% to 4.5% after wrapping up its two-day meeting in Washington — the third time this year it’s hit the pause button. But the Fed also raised some red flags, warning that risks to both inflation and unemployment are mounting in the world’s largest economy.

🚨 JUST IN: Fed Chair Jerome Powell says Donald Trump’s tariffs are a major driver of inflation expectations, with a bigger impact than expected 👀 pic.twitter.com/cxIW584MQV

— BlockNews (@blocknewsdotcom) May 7, 2025

Despite growing pressure from President Donald Trump to cut rates, the central bank held firm, noting that the economic outlook has grown shakier since its last meeting in March. “Uncertainty about the economic outlook has increased further,” the statement read, hinting that rate cuts may be off the table in the near term.

Tariffs, Stagflation, and Market Jitters

Trump’s tariffs on Canadian and Mexican goods — along with his broader “reciprocal” duties — are complicating the Fed’s balancing act. The risk of stagflation, a toxic combo of sluggish growth and rising prices, looms larger now than it did a month ago.

The U.S. economy shrank by 0.3% in the first quarter, according to preliminary estimates from the Bureau of Economic Analysis. Meanwhile, core inflation was running at 2.6% in March, above the Fed’s 2% target.

Despite the mixed data, the job market isn’t cracking just yet. Employers added 177,000 jobs last month, keeping the unemployment rate steady at 4.2%. But for now, it seems like the Fed is holding its breath, waiting for more clarity on how Trump’s tariffs will shake out.

Trump Pressures Powell, Markets Watch for Rate Cuts

Trump hasn’t been shy about taking shots at Fed Chair Jerome Powell, whom he appointed back in 2017. Just last week, Trump called Powell a “total stiff” during an interview with NBC, while also hinting that he won’t try to remove Powell before his term ends next spring.

the Federal Reserve Kept Its Benchmark Interest Rate Unchanged at 425 to 45 After Wrapping Up Its Two day Meeting in Washington

“He should lower [interest rates] … and at some point, he will,” Trump said, clearly frustrated by Powell’s decision to hold rates steady despite Trump’s push for cuts.

Wall Street is still betting on a rate cut in July, with CME Group’s FedWatch tool giving it a 28% chance. But for now, Powell’s sticking to his guns — and that’s not sitting well with Trump or the market.

Tags: Donald TrumpFederal Reserveinflationrate cutsTariffs
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