Fed policymakers expected to keep rates steady as tariffs roil outlook
The Federal Reserve will doubtless leave interest rates unchanged on Wednesday, but the meeting may be the last where the outcome is so cut and dry with President Donald Trump's tariffs casting a shadow of uncertainty over the economic outlook.
Trump's rollout of the steepest U.S. tariffs in a century has tanked consumer and business sentiment, squeezed manufacturing, and prompted a preemptive rush on imports so big that U.S. gross domestic product output shrank unexpectedly last quarter.
Fed policymakers expect the tariffs to increase both inflation and unemployment, although to what degree and for how long is unclear. The economic data in hand so far does not suggest the economy is crumbling. Despite the 0.3% annualized decline in U.S. GDP last quarter, consumer spending still grew at a decent 1.8% pace. The Labor Department's closely watched jobs report on Friday showed that U.S. employers added 177,000 jobs in April - roughly 40,000 more than forecast - and the unemployment rate remained steady at 4.2%.