Federal Reserve warns of inflation and job risks amidst Trumps erratic trade strategy

The Federal Reserve has once again opted to leave interest rates unchanged amidst growing concerns over the American economy. The central bank’s decision marks the third consecutive occasion in which it has maintained the benchmark interest rate, now holding at a range between 4.25% and 4.5%. Federal Reserve Chair Jerome Powell has openly cautioned against the adverse effects of ongoing tariffs introduced by the Trump administration. He stated that such measures are likely to elevate inflation, hinder economic growth, and push up unemployment figures.

Rising inflation expectations, sparked by the tariffs, have become a focal point for the central bank. During a recent press conference, Powell explained that sustained increases in tariffs would trigger a rise in consumer prices while curbing broader economic development. Although President Trump has repeatedly called for rate cuts and even threatened Powell’s position in the past, the Fed remains steadfast. While the President has walked back certain comments, his trade policies have injected significant uncertainty into the economic landscape.

The US economy has already shown signs of vulnerability, with GDP shrinking for the first time in three years during the initial quarter of 2025. This contraction has heightened recession fears, as the Trump administration’s tariffs and continuous threats of imposing new ones cloud the outlook for the world’s largest economy. Despite Trump’s aims of revitalising the US economy and reducing living costs, the Fed has flagged the contrary—warning that costs are expected to rise alongside unemployment.

Stock markets briefly rallied following a recent reversal by Trump, as he reconsidered imposing extensive tariffs on Chinese imports. Powell, however, has refrained from promising any immediate adjustments to the interest rates. While acknowledging the mounting risks, he stated that the central bank requires more data before making further monetary policy decisions.

During the latest two-day meeting, Fed policymakers reassured the public of their commitment to monitor incoming economic information, assess evolving risks, and adjust their strategy accordingly. Powell resisted speculating about potential future actions, citing uncertainties surrounding the economic impact of tariffs and inflationary pressures.

Responding to questions about the President’s conflicting statements over his position at the Fed, Powell delivered notably brief remarks. His reticence, combined with the Federal Reserve’s cautious approach to changing monetary policy, reflects the delicate balancing act required to navigate an increasingly volatile economic climate.