Key dishes to remember
- The federal reserve has held the rate of federal funds stable of 4.25% to 4.5% to assess the risk of prices.
- The prices offered by Trump could increase inflationary pressures, affecting Fed rate decisions.
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The federal reserve held stable interest rates on Wednesday at a range of 4.25% to 4.5% while the officials continued to assess the risk of inflation and the growing uncertainty triggered by the Trump’s commercial agenda.
The Central Bank’s decision was in line with market expectations. According to data from the CME Fedwatch tool, the markets had evaluated a probability of almost 98% that the rates remain unchanged at the May of the Fed.
This marks the third consecutive break in rate drops since January. The central bank had previously lowered the rates three times at the end of 2024 in response to the softening of data on employment and the relaxation of inflation.
The last political position arises from cooling price pressure and continuous labor market strength. In March, the consumer price index (IPC) dropped by 0.1% on a monthly basis, while annual inflation went 2.4%, compared to 2.8% in February.
Meanwhile, April saw solid job gains, strengthening the resilience of the economy despite the uncertainty about Trump’s prices.
The combination of moderate inflation and robust employment supported the choice of the Fed to maintain stable rates.
The Fed policy declaration said that recent indicators suggest that economic activity has continued to develop at a solid pace, the conditions of the labor market remaining strong and the unemployment rate stabilizing at low levels. However, he noted that inflation remains somewhat high and that uncertainty about economic prospects has further increased.
The Committee said that the risks of higher unemployment and higher inflation had increased and stressed that future decisions would depend on incoming data and risk balance. He also reaffirmed his commitment to reduce his assessment and reach his double mandate of maximum employment and inflation by 2%.
President Trump has constantly put pressure on the Fed to reduce interest rates, but recent employment data have decreased the chances of a drop in rates in June.
The market has moved its expectations for rate reductions, less confident participants regarding the reduction in the third quarter. Investors now predict that the Fed will begin to reduce rates in July, with two to three additional discounts projected by the end of the year.
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