The Federal Reserve on Wednesday, May 7,held its key interest rate unchanged as it waits for the Trump administration’s trade policy to take shape and sees its impact on the economy. The decision, widely expected amid rising economic and political uncertainty sweeping the political and economic landscape, the Federal Open Market Committee held its benchmark overnight borrowing rate in a range between 4.25%-4.5%, where it has been since December. “Uncertainty about the economic outlook has increased further,” the Fed said in a post-meeting statement, noting growing risks of both higher inflation and rising unemployment.
What does unchanged rates mean for your pockets?
Interest rates on credit cards, personal loans, and auto loans are unlikely to rise, but they won’t fall either. Adjustable-rate mortgages may also hold steady, while fixed mortgage rates depend more on long-term bond yields. Banks typically follow the Fed’s lead. So, don’t expect higher returns on savings accounts any time soon. While the pause suggests inflation might be slowing, it’s not fully under control. That means prices could continue to rise, just at a slower pace. By keeping rates steady, the Fed is trying to support the labor market and prevent a surge in unemployment as the economy cools.
Why Did the Fed Hold Rates?
The Fed’s decision stems from a mix of inflation concerns and uncertainty driven by trade policy. Chair Jerome Powell said the current stance of monetary policy gives the Fed flexibility to respond quickly to changing economic conditions. A Federal Reserve survey highlighted a sharp decline in business sentiment due to uncertainty over Donald Trump’s trade moves — particularly his tariff threats. Powell noted that the tariff impact has been “significantly larger than anticipated,” and if sustained, could fuel inflation, slow growth, and ultimately increase unemployment.