US Fed interest rates: Amidst the tariff policy chaos, the US Federal Reserve continues to witness an uphill battle with officials acknowledging that they could face "difficult tradeoffs" in the upcoming months owing to persistent inflation levels. Plus, surging unemployment figures might also add to the overall woes. This comes at a time when the US administration took several flip-flopping policy stances on 'reciprocal' trade tariffs.
For the central bank, the current economic situation presents a tough dilemma: whether to cut interest rates or hold steady.
"Almost all participants commented on the risk that inflation could prove to be more persistent than expected," as per minutes of the Federal Open Market Committee.
The Federal Open Market Committee’s last policy meeting took place earlier this month (May 6-7), where the benchmark interest rates were kept unchanged at the range of 4.25% to 4.5%.
"Participants noted that the (Federal Open Market) Committee might face difficult tradeoffs if inflation proves to be more persistent while the outlooks for growth and employment weaken," the minutes said. "Participants agreed that uncertainty about the economic outlook had increased further, making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer."
While inflation fears remain well present, the annual CPI inflation rate stood at 2.3% in April month, the lowest since 2021.
Meanwhile, the US trade court has implemented a pause on the imposition of tariffs.
Halt on Tariffs
On Wednesday, the US Court of International Trade halted President Donald Trump’s 'reciprocal' tariff plan.
The federal court's recent decision comes as a major blow to the Trump administration's economic policies. The White House has criticised the court's ruling. "It is not for unelected judges to decide how to properly address a national emergency," Kush Desai, White House's deputy press secretary reportedly said in a statement.
"President Trump pledged to put America First, and the administration is committed to using every lever of executive power to address this crisis and restore American greatness," he added.
