The Fed keeps interest rates steady as Powell warns that economic uncertainty is 'extremely elevated'
Photo: Kevin Dietsch (Getty Images)
The Federal Reserve said Wednesday that it would keep interest rates steady at 4.25-4.5%, as the central bank continues to work to balance persistent inflation concerns with signs of a slowing U.S. economy.
While inflation has cooled from its 2022 highs, recent data hasn't provided sufficient assurance to begin reducing rates once again. But the Fed's message was a little different this time around, warning of rising risks of both higher unemployment and inflation and raising the possibility of a stagflationary scenario.
'Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,' the Fed said in a statement. 'The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.'
Federal Reserve Chair Jerome Powell said in his own remarksthat the central bank remains committed to price stability and full employment — saying he wanted to prevent a one-time increase in the price level from becoming an continuing inflation problem.
He said the risks of higher unemployment and inflation have risen, and the current policy stance leaves the Fed 'well positioned' to address economic developments 'in a timely way.'
U.S. stock prices fell Wednesday, but the Dow was able to cling to slight gains after the widely anticipated move. The S&P 500 fell 0.5% in the 15 minutes after the release, and U.S. Treasury yields extended their fall.
The Fed's decision came against a backdrop of slowing economic growth and still-sticky inflation. The U.S. economy contracted by 0.3% in the first quarter of 2025, while the labor market showed resilience with 177,000 jobs added in April — a figure that only modestly exceeded expectations.
Core inflation, measured by the Fed's preferred metric, the Personal Consumption Expenditures price index, continues to hover above the 2% target, reinforcing the Fed's cautious stance.
'The economy itself is in solid shape,' Powell said. He added, though, to some laughs from reporters that 'my gut tells me that uncertainty about the path of the economy is extremely elevated.'
Part of that is because of the sweeping set of tariffs President Donald Trump announced in early April, including a 145% duty on Chinese imports. While the Fed doesn't directly weigh in on or set fiscal or trade policy, such developments will affect inflation dynamics going forward — and further complicate the Fed's task.
Powell addressed tariffs in his press conference, saying the central bank will continue to 'wait and see and watch' as the tariff policies change over the coming weeks and months. He said the Fed was comfortable in its policy stance and can move quickly when appropriate.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Bloomberg
8 minutes ago
- Bloomberg
Uncertainty May Lead to 'Pothole' for Stocks: Seema Shah
"This is a tough environment for investors," Seema Shah, Principal Asset Management chief global strategist, says. Speaking on "Bloomberg Open Interest," Shah also says the Federal Reserve won't cut rates until at least the fourth quarter. (Source: Bloomberg)


Forbes
12 minutes ago
- Forbes
Buy LRCX Stock At $90?
CANADA - 2025/02/10: In this photo illustration, the Lam Research Corporation logo is seen displayed ... More on a smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images) Lam Research (NASDAQ:LRCX) stock has experienced a notable increase this year, rising by 22% and significantly outperforming the S&P 500's modest gain of 2%. This remarkable performance can be attributed primarily to the company's solid quarterly results, fueled by strong foundry revenues and improving margins. Given this recent surge, the crucial question for investors is whether LRCX is still a compelling purchase. We believe it is. Despite its current price hovering around $90, we see little reason for worry regarding LRCX stock, particularly in light of its reasonable valuation. Our conclusion stems from a thorough analysis of Lam Research's operational performance in recent years, along with its current and historical financial health. We have assessed the company based on several core metrics: Growth, Profitability, Financial Stability, and Downturn Resilience. Our results show that Lam Research demonstrates exceptionally strong operating performance and financial stability, positioning it as an attractive investment option. However, for those investors who prefer lower volatility compared to individual stocks, the Trefis High Quality portfolio offers an alternative — it has outperformed the S&P 500 and delivered returns exceeding 91% since its inception. Separately, see – What's Better – Circle Stock Or Bitcoin? When considering what you pay per dollar of sales or profit, LRCX stock appears slightly overvalued in relation to the wider market. Lam Research's Revenues have demonstrated significant growth over the past few years. Lam Research's profit margins are significantly higher than those of most companies in the Trefis coverage universe. Lam Research's balance sheet appears very robust. LRCX stock has underperformed compared to the benchmark S&P 500 index during some recent downturns. Concerned about how a market crash could affect LRCX stock? Our dashboard How Low Can Lam Research Stock Go In A Market Crash? provides an in-depth analysis of how the stock has fared during and after previous market crashes. In conclusion, Lam Research's performance across the discussed metrics is summarized as follows: Overall, Lam Research has demonstrated excellent performance across the critical metrics we evaluated. We believe this strong operational and financial health is not entirely reflected in the current moderate valuation of the stock, making LRCX an appealing investment. This further reinforces our belief that Lam Research is a solid investment choice. Although LRCX stock appears promising, investing in a single stock can entail risks. Conversely, the Trefis High Quality (HQ) Portfolio, comprising 30 stocks, has consistently outperformed the S&P 500 over the past 4-year period. Why is that the case? As a group, HQ Portfolio stocks yielded better returns with lower risk in comparison to the benchmark index; providing a smoother ride, as shown in HQ Portfolio performance metrics.

Epoch Times
16 minutes ago
- Epoch Times
US–China Hold Second Day of Trade Talks in London
U.S. and Chinese officials met for a second day of economic and trade discussions in London on June 10. Commerce Secretary Howard Lutnick told reporters that the two sides met all day on June 9 and will likely meet again on June 10.