The US Federal Reserve announced another pause in rate cuts on Wednesday, warning of heightened risks to its inflation and unemployment goals, likely due to President Donald Trump’s sweeping tariffs.
Policymakers unanimously voted to maintain the central bank’s key lending rate between 4.25% and 4.50%, according to a Federal Reserve statement. This decision reflects the Fed’s cautious approach as it navigates economic turbulence sparked by Trump’s trade policies. Via AFP.
The Fed’s Dual Mandate and Economic Context
The Federal Reserve operates under a dual mandate to independently address inflation and unemployment, primarily by adjusting its benchmark lending rate. Despite “swings in net exports” due to a pre-tariff surge in imports ahead of Trump’s “liberation day” tariffs, the Fed noted that economic activity remains solid. Recent data indicates an economic contraction in Q1 2025, yet unemployment remains near historic lows at 4.2%, and inflation is trending toward the Fed’s 2% target. Explore more on the US economy.
Trump’s Tariffs and Market Turbulence
Last month, President Trump introduced steep tariffs, including a 145% levy on Chinese goods and a 10% baseline on imports from most other countries. These measures triggered weeks of financial market volatility. The White House later imposed higher tariffs on dozens of trading partners but paused them until July 2025 to renegotiate trade deals. Economists warn that these tariffs could increase consumer prices and slow economic growth in the short term. Learn about Trump’s trade policies.
Jerome Powell’s Press Conference: A Balancing Act
Fed Chair Jerome Powell is expected to tread carefully during his press conference, aiming to make “very little news,” as predicted by Nationwide Chief Economist Kathy Bostjancic in an AFP interview. Powell faces scrutiny over the Trump administration’s public criticism, including Trump’s call to lower rates. In a recent interview, Trump reiterated, “He should lower them,” while insisting he has no plans to fire Powell before his term ends in 2026. Read more about Jerome Powell.
Former Fed economist Rodney Ramcharan, now a professor at USC Marshall School of Business, warned that Trump’s public comments could undermine the Fed’s perceived commitment to price stability. “If the Fed were to cut rates, markets could perceive that decision as ‘political’ rather than a reaction to actual economic conditions,” Ramcharan noted.
Future Outlook: Delayed Rate Cuts
Analysts have scaled back expectations for rate cuts, citing tariffs as a driver of higher prices and slower growth. UniCredit economists suggest that the Fed is unlikely to act before September 2025, as the 90-day tariff pause extends through July 8. Goldman Sachs’ Jan Hatzius forecasts three consecutive 25-basis-point cuts starting in July, but the outlook remains uncertain. Stay updated on inflation trends.
Historical Context: The Smoot-Hawley Tariff Act
An interesting historical parallel is the Smoot-Hawley Tariff Act of 1930, which raised US tariffs on over 20,000 imported goods. Intended to protect American industries during the Great Depression, it backfired, exacerbating global trade declines and deepening the economic crisis. Some economists draw comparisons to Trump’s tariffs, warning of similar risks to global trade and economic stability. Discover more US historical events.
Traditional American Recipe: Apple Pie
To lighten the economic discussion, here’s a nod to American culture with a classic apple pie recipe, a symbol of tradition and comfort:
Classic American Apple Pie
Ingredients:
- 2 pie crusts (store-bought or homemade)
- 6 cups sliced apples (Granny Smith or Honeycrisp)
- 3/4 cup sugar
- 1 tbsp lemon juice
- 1 tsp cinnamon
- 1/4 tsp nutmeg
- 2 tbsp all-purpose flour
- 1 tbsp butter, cut into small pieces
- 1 egg (for egg wash)
Instructions:
- Preheat oven to 375°F (190°C).
- Roll out one pie crust and place it in a 9-inch pie dish.
- In a large bowl, mix apples, sugar, lemon juice, cinnamon, nutmeg, and flour.
- Pour the apple mixture into the crust and dot with butter.
- Cover with the second crust, seal edges, and cut slits for ventilation.
- Brush with egg wash and bake for 45–50 minutes until golden brown.
- Let cool before serving. Enjoy with vanilla ice cream!
Explore more American traditions.
Conclusion
The Federal Reserve’s decision to pause rate cuts underscores the uncertainty surrounding Trump’s tariff policies and their economic implications. As the Fed balances its dual mandate, the coming months will be critical in shaping monetary policy and global trade dynamics. Stay informed with Planet-Today.com for the latest updates.
Author: Planet-Today.com