Are You Following the Interest Rate Debate?

The verdict is in: the Federal Reserve is holding interest rates steady—despite mounting pressure to cut them. Fed Chair Jerome Powell made it clear that the central bank isn’t rushing into any decisions, especially as it monitors the impact of newly implemented tariffs.

In a unanimous vote, policymakers chose to keep the Fed’s benchmark interest rate in the range of 4.25% to 4.5%. While acknowledging an increasingly uncertain economic outlook, the Fed maintains that the economy and labor market remain strong. However, a recent GDP report revealed that the economy contracted in the first quarter—the first time in three years—adding another layer of complexity to the Fed’s calculations.

There’s also growing concern about a potential clash of the Fed’s dual mandates: price stability and maximum employment. These two goals typically align, but Powell warns they may soon diverge, forcing the Fed to prioritize one over the other.

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