The Federal Reserve began a two-day meeting today, Tuesday, in the capital Washington, with widespread expectations to keep interest rates unchanged, despite repeated pressure from U.S. President Donald Trump to cut them by a full percentage point.
Policymakers are closely monitoring the impact of the broad tariffs imposed by Trump on the U.S. economy, particularly on inflation and the labor market.
The Federal Reserve's decision on interest rates is expected to be announced at 2 PM Washington time on Wednesday.
Stability is likely despite slowing inflation
Although the Federal Reserve previously lowered interest rates as inflation declined after the COVID-19 pandemic, it has kept them this year in the range of 4.25 percent to 4.50 percent, amid increasing uncertainty related to trade policy.
The U.S. President continues to call for interest rate cuts, demanding bolder action from the Fed, but the central bank prefers to take its time in making decisions, relying on data rather than politics, according to analysts.
The impact of tariffs on prices remains limited
Despite imposing a 10 percent tariff on most imports, along with larger increases on steel, aluminum, and cars, no significant effects on price levels have been observed so far, as companies rely on their stockpiles before the tariffs take effect.
Ryan Sweet, chief U.S. economist at Oxford Economics, warned that rising tensions in the Middle East could lead to higher oil prices, fueling inflation, noting that the Fed must remain flexible in the face of these threats.
Analysts will be closely watching the updates issued by the Fed regarding its forecasts for inflation, growth, and unemployment, in an effort to understand whether it considers trade tariffs a temporary factor or a long-term threat to the economy.
