On May 7, 2025, Federal Reserve Chair Jerome Powell announced the Fed will hold interest rates at 4.25%–4.5%, choosing caution over action as the U.S. economy absorbs the shock of newly imposed tariffs.
🚨 What’s happening?
The Trump administration’s massive 145% tariff on Chinese imports has upended global supply chains, pushing up costs for businesses and consumers across the board. Inflation is rising—not from consumer demand, but from trade barriers.
🧭 Powell’s Message: “Wait and See”
Powell made it clear: the Fed won’t budge until it sees more data on how these trade policies play out. Even under public pressure from President Trump to slash rates, the Fed is holding its ground and staying independent.
📈 Markets React with Caution
Although major indexes closed higher on May 7, investors aren’t celebrating just yet. Stocks remain down for the week and year, with growing anxiety around stagflation—that tricky combo of slow growth + rising prices 📊⚠️.
🔍 Why this matters:⚠️
The Fed is in a tough spot: inflation is creeping up due to policy, not organic growth. Cutting rates now could worsen inflation. But holding steady risks choking off growth. This delicate balancing act could define U.S. economic momentum for the rest of 2025.
📣 Stay tuned—next moves could reshape opportunities.