The U.S. Federal Reserve (Fed) is expected to maintain interest rates at the two-day meeting on May 6-7, as the agency waits to see how President Donald Trump's inconsistent implementation of tariffs will impact the world's largest economy.

Trump has imposed high tariffs on China, along with a "basic" 10% tariff on goods from most other countries and a 25% tariff on specific items such as steel, cars, and aluminum. The President has also suspended higher tariffs on dozens of other trade partners until July, giving them time to renegotiate existing agreements with the U.S.

Most economists forecast that the tariffs imposed starting January 2025 will drive prices up and constrain economic growth - at least in the short term. This could force the Fed to delay lowering interest rates for longer.

Loretta Mester, who just finished her term as President of the Cleveland Fed, stated that the Fed needs to focus heavily on controlling inflation to prevent the risk of inflation rising persistently again. Otherwise, it would undermine the efforts the Fed has made over the past three years to bring inflation down.

Jim Bullard, the long-time former President of the St. Louis Fed, remarked that the Federal Open Market Committee (FOMC) is in a good position and is likely to keep interest rates unchanged at this week's meeting. Bullard, who is currently the Dean of the Daniels School of Business at Purdue University, added that he thinks this is a reasonable stance given the volatility from the trade war.