US FOMC keeps rates unch; commentary takes note of tariff impact on econ
This story was originally published at 06:00 IST on 8 May 2025
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--US FOMC leaves federal funds rate target range unch at 4.25-4.50%
--US FOMC: Data suggests economic activity continues to expand at solid pace
--US FOMC: Recent economic data influenced by swings in net exports
--US FOMC: Unemployment stabilised at low level, labour mkt conditions solid
--US FOMC: Inflation remains somewhat elevated
--US FOMC: Uncertainty about economic outlook has increased further
--US FOMC: Risks to both higher unemployment, inflation have risen
--US FOMC: Attentive to risks on both sides of dual mandate
NEW DELHI – The US Federal Open Market Committee Wednesday unanimously voted to keep the federal funds target rate range unchanged at 4.25-4.50% for the third straight meeting. However, its comments took note of the evolving trends in the world's largest economy after US President Donald Trump's sweeping tariffs were announced in April.
"Uncertainty about the economic outlook has increased further," the FOMC statement said. "The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen." The committee did not directly mention the tariffs.
Government data showed the US unemployment rate remained steady at 4.2% in April, while core personal consumption expenditure index inflation cooled to 2.6% in March from 3.0% in February. The FOMC said inflation continues to remain somewhat elevated, with its target at 2.0% over the long-term.
The FOMC has held rates at the current level in 2025 after cutting the policy rate target range by 100 basis points between September and December. The committee noted that recent data showed the economy had continued to expand at a solid pace, despite the swings in net exports. The US goods trade deficit rose 14.0% on year to $140.5 billion in March.
After its last meeting on Mar. 18-19, data showed US imports surged in Jan-Mar as importers looked to get ahead of the impact of impending tariffs. On Apr. 2, the Trump administration unveiled tariffs on most of its largest trade partners, which it has held in abeyance for 90 days, along with a 10% baseline tariff on all imports. However, goods from China –- the world's second-largest economy and among the US's top trade partners – continue to invite a tariff of 145%.
Analysts and traders had almost unanimously expected the US FOMC to hold rates on Wednesday. At 0010 IST, the yield on the 10-year US Treasury note was at 4.29%, little changed from 4.30% before the rate decision.
The rest of the FOMC's commentary was unchanged from its last release in March. It said that unemployment had stabilised at a low level and labour market conditions were solid. It also said that it was strongly committed to returning inflation back to its 2% aim and ensuring maximum employment. In March, members of the US Federal Reserve had projected core personal consumption expenditure inflation at 2.0% only by the last quarter of 2027.
"In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks," the statement said.
Meanwhile, the panel voted to keep the pace of its balance sheet run-off at $40 billion per month, with the monthly redemption cap on Treasury securities at $5 billion. The FOMC had reduced the size of the balance sheet run-off starting Apr. 1. Between June and April, it had been trimming its balance sheet by $60 billion every month in Treasury and mortgage-backed securities, after $95 billion of monthly sales the prior two years. End
US$1 = INR 84.8250
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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