MAY 12, 2025 – FED MEETS, RATES REMAIN UNCHANGED
The Fed met last week and continued to hold rates steady between 4.25 to 4.5 percent, where they have been since December. The uncertainty in the economic outlook was cited as the reason they are choosing to wait before lowering rates. The Fed is concerned that both inflation and the unemployment rate are under pressure.
The Fed’s mandate is to create a balance between stable prices and full employment, but this is challenging given the Trump tariffs. The possibility of stagflation has arisen for the first time since the 1980’s. Fed Chair Powell stated the economy is still in solid shape despite the perceived challenges.
GDP fell in Q1 due to a surge of imports and lower government spending, but most economists expect positive growth in the second quarter. The unemployment rate has held steady at 4.2 percent. No movement in interest rates is expected before the Fed’s July meeting, at the earliest.