Federal Reserve Maintains Cautious Stance on Interest Rates

The US Federal Reserve is expected to keep interest rates unchanged in its latest policy meeting, as officials carefully evaluate the effects of tariffs on inflation and other economic indicators. The benchmark lending rate has remained steady at 4.25–4.50 percent throughout the year, with analysts predicting this cautious approach will continue until there's clear evidence of inflation cooling.

Impact of Tariffs on Inflation Still Unclear

Despite President Donald Trump's imposition of 10 percent tariffs on most US trading partners and higher levies on specific goods like steel and aluminum, consumer prices have not risen significantly. This limited impact is attributed to the delayed implementation of some tariffs and businesses using existing inventory to avoid immediate price increases.

Fed Adopts Wait-and-See Approach

With the consumer price index showing a slight increase to 2.4 percent year-on-year in May, economists caution that the full effects of tariffs may take months to materialize in consumer prices. The Federal Reserve is thus taking a "wait-and-see" stance on interest rate adjustments.

Political Pressure and Economic Independence

Despite President Trump's public calls for lower interest rates, including criticism of Fed Chair Jerome Powell, the Federal Reserve has reiterated its independence and commitment to data-driven decision-making. Economists like Dan North of Allianz Trade North America suggest that the current economic health does not necessitate rate cuts, expecting rates to remain unchanged until the end of the year.