Fed leaves rates unchanged as Powell warns on tariffs
The Federal Reserve says the risks of higher inflation and unemployment are increasing under Trump's tariffs


What happened
The Federal Reserve voted unanimously Wednesday to keep interest rates unchanged, disregarding President Donald Trump's demands for lower borrowing costs as his global trade war roils the U.S. and global economies.
Who said what
Trump's "large increases in tariffs," if "sustained," are "likely to generate a rise in inflation, a slowdown in economic growth and a rise in unemployment," Fed Chair Jerome Powell said at an afternoon press conference. But "the scope, the scale, the persistence of those effects are very, very uncertain." The "unusual" combination of "higher prices and more unemployment" is "often referred to as 'stagflation,'" The Associated Press said, and it "strikes fear in the hearts of central bankers."
If unemployment rises, the Fed can cut rates, while rising inflation is usually countered by raising borrowing costs. Powell's comments were his "subtle way of saying the U.S. central bank" was "effectively sidelined until Trump's sweeping policy agenda takes full effect," Reuters said. He "used some version of the word 'wait' 22 times to underscore how the Fed isn't in a rush" to "cushion economic weakness" from Trump's tariffs, The Wall Street Journal said.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
What next?
"We're all kind of waiting around expecting a slowdown in the economy," William English, a Yale business professor and former Fed adviser, told the Journal, but the "hard data" is not showing it yet. "We're in a good position to wait and see," Powell said, and "respond in a timely way" when the data arrives.
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Rafi Schwartz has worked as a politics writer at The Week since 2022, where he covers elections, Congress and the White House. He was previously a contributing writer with Mic focusing largely on politics, a senior writer with Splinter News, a staff writer for Fusion's news lab, and the managing editor of Heeb Magazine, a Jewish life and culture publication. Rafi's work has appeared in Rolling Stone, GOOD and The Forward, among others.
-
An American girl takes on London, 'Bosch' gets another spinoff and Washington Black leaps from page to screen in July TV
the week recommends This month's new television releases include 'Too Much,' 'Ballard' and 'Washington Black'
-
Australian woman found guilty of mushroom murders
speed read Erin Patterson murdered three of her ex-husband's relatives by serving them toxic death cap mushrooms
-
Elon Musk launching 'America Party'
Speed Read The tech mogul promised to form a new political party if Trump's megabill passed Congress
-
Elon Musk launching 'America Party'
Speed Read The tech mogul promised to form a new political party if Trump's megabill passed Congress
-
Judge blocks Trump's asylum ban at US border
Speed Read The president violated federal law by shutting down the US-Mexico border to asylum seekers, said the ruling
-
Thai court suspends prime minister over leaked call
Speed Read Prime Minister Paetongtarn Shinawatra has been suspended, pending an ethics investigation
-
Senate passes GOP megabill after Alaska side deal
The pivotal yes vote came from Sen. Lisa Murkowski, whose support was secured following negotiated side deals for her home state Alaska
-
Trump sues LA over immigration policies
Speed Read He is suing over the city's sanctuary law, claiming it prevents local law enforcement from cooperating with federal immigration authorities
-
Obama, Bush and Bono eulogize USAID on final day
Speed Read The US Agency for International Development, a humanitarian organization, has been gutted by the Trump administration
-
Senate advances GOP bill that costs more, cuts more
Speed Read The bill would make giant cuts to Medicaid and food stamps, leaving 11.8 million fewer people with health coverage
-
Canadian man dies in ICE custody
Speed Read A Canadian citizen with permanent US residency died at a federal detention center in Miami