FX.co ★ Fed Keeps Rates Steady but Signals Risks of Higher Inflation and Unemployment

The Federal Reserve maintained the federal funds rate at 4.25%–4.50% for the third consecutive meeting in May 2025, aligning with market expectations. This decision reflects a cautious stance as officials remain vigilant over President Trump's tariff policies, which could potentially exacerbate inflation and hinder economic growth. Policymakers acknowledged heightened uncertainty regarding the economic outlook, with increased risks of both rising unemployment and inflation. Despite fluctuations in net exports affecting economic data, recent indicators reveal that economic activity continues to grow robustly. The unemployment rate has stabilized at a low level recently, and labor market conditions remain strong. Nonetheless, inflation rates persist at somewhat elevated levels.