US Federal Reserve keeps key interest rate unchanged again

Dubai: The US Federal Reserve held its benchmark interest rate steady for a third consecutive meeting, as expectations grew that it would maintain a wait-and-see approach until there's more clarity on the impact of President Donald Trump's trade policies.

In its statement, the Federal Open Market Committee (FOMC) flagged increased risks to its inflation and employment targets—likely a nod to rising tariffs. Policymakers voted unanimously to keep the central bank’s key lending rate in the range of 4.25% to 4.50%.

The Fed also noted that recent "swings in net exports" hadn’t noticeably affected overall economic activity, pointing to the import surge that preceded the latest tariff measures.

Ahead of the decision, the central bank was largely expected to keep its benchmark rate steady, with traders watching closely whether Trump's economic policies are prompting any change in view on when to ease policy.

"The tariff situation is extremely fluid and unpredictable, therefore it would be irresponsible for the Fed to attempt to be responsive to tariffs when the situation can change drastically and their actions could lack the intended impacts or even worse compound a detrimental effect," said Chris Brigati, chief investment officer at SWBC.

Brewing war

Last month, the US President imposed steep tariffs on Chinese imports, alongside a baseline 10% levy on goods from most other countries—a move that triggered weeks of volatility across global financial markets.

The White House also announced higher tariffs on several other trading partners but later postponed their implementation until July, allowing time for possible renegotiation of existing trade agreements.

Meanwhile, recent economic data suggests a slowdown, with indicators pointing to a potential contraction in the first quarter. Despite that, the unemployment rate has remained near historic lows, and inflation appears to be aligning with the Federal Reserve’s 2% long-term target.