The U.S. economy shows good health but Federal Reserve Chair Jerome Powell faces a policy challenge because of rising geopolitical tensions and unpredictable trade effects.
The Federal Reserve will maintain its benchmark interest rate at 4.4% during its two-day meeting because inflation indicators indicate a decline while unemployment stands at 4.2%. The growth rate faces potential decline because President Donald Trump has implemented tariffs which could drive up prices.
Central bank officials will publish their updated projections during Wednesday. The projections from economists indicate that inflation will accelerate during the current year and unemployment might increase. Markets predict between one and two interest rate reductions throughout the current year.
The Fed’s “dot plot” may indicate a more hawkish position because policymakers need to weigh between decreasing economic growth and potential price inflation risks. The recent conflict between Israel and Iran caused oil prices to rise which increased market uncertainty.
Powell has indicated through his statements that the Federal Reserve will not take any immediate action. The officials will keep their options open until they receive more definitive data signals and global development updates.
