The US Federal Reserve held interest rates steady yesterday, marking the third meeting with no interest rate cuts from the central bank.
The Federal Open Market Committee’s (FOMC) statement justified this caution, citing rising uncertainty about the economic outlook and the risks of higher unemployment and inflation.
This decision was expected by many market commentators. Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “It wasn’t a huge surprise to see US rates unchanged, but it will come as a blow to president Trump, who has been pushing hard for the Fed to abandon its independence and deliver lower rates for Americans.”
Lindsey James, investment strategist at Quilter, argued that investors should not expect rate cuts until “late July at the earliest”, following the end of the 90-day negotiating window for reciprocal tariffs.
“The conditions are ripe for markets to be buffeted for a while longer, as you have the threat of rising inflation and unemployment during weakening economic growth. The Fed is in for a tough few months to come as a result,” James explained.
Tiffany Wilding and Alison Boxer, economists at PIMCO, agreed that the Fed was in a “tricky spot”. Rate cuts going forward will depend on empirical data showing that the labour market is either expanding or contracting, they said. They expect the central bank to proceed cautiously until it receives “clear evidence that inflation expectations are well-anchored and that recession risks are rising conclusively”.