In a statement after a two-day policy meeting, the Fed said the US economy was still growing solidly, despite a 0.3% decline in first-quarter GDP.
The Fed said the decline was largely due to businesses and households boosting imports to avoid new tariffs.
Although the labor market remains strong, with the unemployment rate holding steady at 4.2% and 177,000 new jobs in April, the Fed warned that the economic outlook is becoming less certain.
The Fed is closely monitoring the risks to both sides of its dual objectives: high inflation and unemployment. Current inflation, the PCE index at 2.3% and the core PCE at 2.6%, are approaching the 2% target but are still subject to the risk of rebounding due to the impact of tax policies.
Great pressure comes from the administration of President Donald Trump, when new import tax policies are increasing the risk of "stagflation", a condition that caused great difficulties for the US economy in the 1980s.
Fed policymakers still believe the economy is resilient enough to maintain steady monetary policy, but they also acknowledge the fragility of the outlook as the trade war and business uncertainty become more evident.
The Trump administration is currently in the midst of a 90-day trade negotiation period with major partners, while mixed economic signals make it difficult for the Fed to make drastic policy adjustments.
President Trump has repeatedly called on the Fed to lower interest rates as inflation shows signs of easing, but policymakers have remained cautious, waiting for clearer data.
While the stock market has recovered slightly on hopes for the effectiveness of the tariff measures, the business community remains deeply concerned about the risk of supply chain disruptions and rising costs. Surveys show that many business owners are worried about price instability and the market’s ability to respond.
On the financial market side, investors do not expect the Fed to cut interest rates immediately at this meeting, and only about 30% believe there may be an easing move in June. However, the general expectation in the market is that the Fed can make a total of three interest rate cuts in 2025, depending on the actual developments from economic and policy factors.
Source: https://baonghean.vn/fed-giu-nguyen-lai-suat-canh-bao-lam-phat-va-that-nghiep-gia-tang-10296793.html
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