US Fed Holds Rates Steady At 3.5–3.75%; Powell Signals Caution On Cuts

The US Federal Reserve kept its benchmark interest rates unchanged, maintaining the federal funds rate at 3.5 to 3.75 per cent.

Federal Reserve Chair Jerome Powell said the current policy stance remains appropriate as the central bank continues to monitor economic developments closely. He said the US economy is expanding at a solid pace, even as inflation remains above the Fed’s 2 per cent target and the labour market shows signs of softening.

Powell noted that inflation has eased significantly from its 2022 peak but still remains elevated.

Data showed total PCE prices rising 2.8 per cent and core PCE at 3.0 per cent over the past year. He warned that rising energy costs could add further pressure to inflation in the near term.

Powell highlighted the uncertainty stemming from geopolitical tensions in the Middle East, saying the implications for the US economy remain unclear. He stressed that policymakers will stay alert to risks affecting both inflation and employment.

Referring to the potential impact of sustained high oil prices or supply disruptions, he said, ‘Nobody knows’. He said the Fed will decide policy meeting by meeting. While projections suggest possible rate cuts this year, easing will depend on sustained progress on inflation.

“If we don’t see that progress, you won’t see a rate cut,” he said, reaffirming the Fed’s commitment to anchoring inflation at 2 per cent.

Powell said job growth has slowed, although the unemployment rate remains broadly stable. He pointed to slower labour force growth as a key factor influencing employment trends.

Despite these challenges, he said the US economy has remained resilient through multiple shocks in recent years.

Also Read: IDF Claims Iran Intelligence Chief Esmaeil Khatib Killed In Tehran Strike