Jerome Powell & FED Leave Interest Rates Unchanged at FOMC Meeting

The US Federal Reserve has kept benchmark interest rates at 4.25% to 4.5% following the 2-day May FOMC meeting, which held between May 6 and 7. This comes despite calls from US President Donald Trump for FED Chair Jerome Powell to lower rates since inflation is down.

FOMC Meeting: US Federal Reserve Keeps Rates Unchanged

In a press release, the Fed announced it has decided to maintain the target range for the federal funds rate at 4.25% to 4.5%, which is in line with market expectations. Traders had bet in favor of Jerome Powell and the committee keeping rates steady at this May FOMC meeting.

This marks the third consecutive meeting in which the Fed has decided to leave rates steady, following the January and March monetary policy meetings. Meanwhile, before then, the US Central Bank had cut rates consecutively in September, November, and December 2024.

Jerome Powell and the FOMC remain adamant about cutting rates despite several calls from Donald Trump. The US president has asserted that there is no inflation, which is why he believes this is the perfect time for them to lower rates.

However, the Fed argues that inflation remains “somewhat elevated” and that uncertainty about the economic outlook has increased further, likely due to Trump’s tariffs, which Powell had warned about. The US Central Bank also noted that higher unemployment and inflation risks have risen.

CoinGape reported that the US Nonfarm payrolls increased by 177,000 in April compared to market expectations of 133,000. Meanwhile, the unemployment rate remained unchanged at 4.2%.

Traders Still Expect Three Fed Rate Cuts This Year

Despite the Fed’s decision to keep rates steady at the FOMC meeting, traders are still betting on three rate cuts this year. They expect the first to come at the July meeting. There is a 54.9% chance that the Fed will cut the benchmark rates to 4.00% and 4.25% in June.

Meanwhile, there is also a 48.3% chance that there will be another 25 basis points (bps) cut in September, while the third rate cut comes in October. CME Fedwatch data shows a 69.3% chance that Powell and the FOMC will keep rates unchanged at the June meeting.

Interestingly, while the Fed continues to hold off on cutting rates, other countries are moving to ease monetary policies and inject liquidity into their respective economies. China’s Central Bank cut key rates yesterday and injected $139 billion of liquidity into the economy. The Central Bank made this move amid plans between the US and China to begin trade talks and work towards lowering tariffs.

Jerome Powell Indicates No Hurry To Cut Rates

In his speech, Fed Chair Jerome Powell stated that there is no need to be in a hurry to adjust interest rates. He claimed that there is so much uncertainty that we are in a good position to wait and see how it plays out.

Powell alluded to Trump’s tariffs and suggested that this is the primary reason they are holding off on cutting rates. He remarked that avoiding inflation will depend on the size and timing of tariffs. The Fed Chair added that the survey points to tariffs as driving inflation expectations.