Fed holds interest rates steady, but tariffs remain a ‘notable headwind to economic growth,' analyst says

The Federal Reserve held borrowing costs steady , opting not to cut its benchmark interest rate — known as the federal funds rate — for credit cards, loans and auto financing.

As was widely expected, the Fed is keeping the federal funds rate at 4.25% to 4.5%. This influences the interest rates lenders charge on most types of credit, meaning credit card rates will stay high and new loans won't get any cheaper.

The rate has stayed for more than two years as the Fed has aimed to lower inflation by keeping borrowing costs high. Its target annualized rate is 2%, but the current rate remains at 2.4% as of April, .

The outlook on inflation remains uncertain. Signs of a and suggest that rate cuts could be needed in 2025 to support a recovery.

But new tariffs imposed by the Trump administration are . If prices continue to rise, the Fed may keep interest rates higher for longer.

President Donald Trump has demanded that Fed chair Jerome Powell cut rates to spur growth, but the Fed has taken a wait-and-see approach, holding off on cuts .

Interest rates cuts are uncertain in 2025

At a press conference announcing the rate pause, Powell said that sustained tariffs will likely to drive up inflation, slow economic growth and raise unemployment.

However, he said it's hard to gauge the exact impact of those tariffs on inflation: "There's so much uncertainty about the scale, scope, timing and persistence of the tariffs." For now, "we're going to be patient," he said of the Fed's policy stance.

When asked whether the Fed will cut rates at all in 2025, Powell said it will depend on how the economic data unfolds.

As of Wednesday's announcement, there's a 72% chance of an interest rate cut by the end of July 2025, according to the , a real-time tracker that measures rate hike probabilities.

Those expectations "reflect a risk that the economy slows sharply and the Fed is able to look past a pickup in inflation as a one-time hit," Greg McBride, chief financial analyst at Bankrate, tells C온라인카지노사이트 Make It. "Markets also have a tendency to overestimate how much the Fed will cut interest rates, so time will tell."

Either way, tariffs are a "notable headwind to economic growth," says McBride.

Tariffs and cost the average household $4,900 within the next year, according to Yale Budget Lab estimates published in April. The analysis is based on tariff policies that include the 10% baseline rate now in effect for most countries. However, it doesn't include additional tariffs that were.

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