US Fed Meeting: Jerome Powell Leaves Interest Rates Unchanged Amid Mixed Signals From Economy

US Federal Reserve Jerome Powell has left the benchmark lending rates unchanged — for a third time in a row — amid mixed signals emerging from the economy and uncertainty prevailing over the now-paused import tariffs announced last month.

Following the conclusion of the two-day meeting of the Federal Open Market Committee on Wednesday, an official statement confirmed that the benchmark lending rates remain in the range of 4.25-4.5%. The decision was taken unanimously by the FOMC members.

This comes after the Fed similarly held rates in the monetary policy review meetings held in January and March. The central bank had only resumed cutting rates in September last year, as it turned its trajectory following a four-year period. In that month, it had reduced the rates by 50 basis points, followed by a 25 bps reduction in the next two months.

In a statement issued following the FOMC meeting, the Fed noted that uncertainty over the economic outlook has "increased further". The Committee is attentive to the "risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen,” it added.

This comes amid the US economy exhibiting both strength and weakness. Even as the gross domestic product declined by 0.3% on a yearly basis in the January-March quarter, the slump was primarily driven by a surge in imports before the tariffs kicked-in in April.

Also, the employment data showed the resilience of the US economy, with non-farm payrolls data showing an addition of 177,000 jobs in April, higher than the estimates. A strong job market disincentivises the Fed to reduce the lending rates.

"Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace," the FOMC said.

The unemployment rate has "stabilised at a low level" in recent months, and labour market conditions "remain solid", it said, while adding that inflation remains somewhat elevated.

The Fed said it will carefully assess incoming data, the evolving outlook, and the balance of risks, but reiterated its long-term inflation target of 2%. "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," it said.

The stance of monetary policy could be adjusted as appropriate if risks emerge that could impede the attainment of the Fed's goals, the statement added.

The assessments will take into account a wide range of information, including readings on labour market conditions, inflation pressures and inflation expectations, and financial and international developments, it further said.

Ahead of the latest Fed rate decision, the market had widely expected Powell's team to stick to the status quo. The CME Group's FedWatch tool indicated a barely 2% chance of rate cut, and showed a one-in-three probability of a reduction in the June meeting.