🇺🇸 What Happened at the May 2025 FOMC Meeting?
On May 7, 2025, the U.S. Federal Reserve (the Fed) held its regular Federal Open Market Committee (FOMC) meeting. The main decision was to keep interest rates unchanged at 4.25%–4.5%. This is the third consecutive meeting where the Fed has kept rates steady, despite pressure from President Trump to lower them.
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📊 Why Did the Fed Hold Rates?
Fed Chair Jerome Powell explained that the central bank is being cautious due to rising risks of inflation and unemployment, partly caused by new tariffs introduced by the Trump administration. These tariffs have led to increased prices and economic uncertainty.
The Fed is trying to balance two goals: keeping inflation low and maintaining strong employment. With the current uncertainty, they prefer to wait and see how the economy evolves before making any changes.
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📉 What’s the Economic Outlook?
Growth: The U.S. economy shrank by 0.3% in the first quarter of 2025, compared to 2.4% growth in the previous quarter.
Inflation: Inflation remains above the Fed’s 2% target, with March figures at 2.4%.
Jobs: The job market is still strong, adding 177,000 jobs in April, and unemployment remains low at 4.2%.
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📉 What Is Stagflation?
Some experts are concerned about "stagflation," a situation where the economy slows down (stagnation) while prices keep rising (inflation). This is a tricky problem because fixing one issue can make the other worse.
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📈 Market Reaction
After the Fed's announcement, stock markets initially dipped but later recovered. Investors are hopeful that upcoming trade talks between the U.S. and China might ease tensions and improve the economic outlook.
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