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The Federal Reserve kept its key interest rate unchanged at 4.3 percent on Wednesday, defying pressure from President Donald Trump to lower borrowing costs and warning that the risks of both rising inflation and growing unemployment have increased.
The Fed said in a statement, “Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”
This marks the third consecutive meeting at which the Fed has held rates steady, following a series of three cuts at the end of last year. While many economists and Wall Street analysts still expect two or three rate reductions in 2025, the economic turbulence triggered by Trump’s sweeping tariffs has clouded the Fed’s policy outlook.
It’s rare for the Fed to signal heightened risks of both inflation and job losses at the same time. But economists say that’s exactly the dilemma created by the import taxes. The tariffs raise prices on imported parts and finished goods, pushing inflation higher. At the same time, companies facing rising costs may cut jobs, pushing unemployment up.
This puts the Fed in a challenging position. Its dual mandate is to keep inflation in check and support full employment. But Trump’s trade policies have created opposing pressures—making it harder for the Fed to use traditional tools like interest rate adjustments to stabilize the economy.
This is a developing news story and will be updated as more information is available.
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