FOMC maintains rates amid heightened uncertainty over trade policy

The Federal Open Market Committee (FOMC) unanimously decided to maintain the policy rate at 4.25%–4.5% at its May 6–7 meeting. The meeting was the first since President Trump announced retaliatory tariffs on April 2, and the minutes showed growing hesitancy among attendees.

Members pointed out that current predictions held more uncertainty than the 20-year average, which was a major subject when discussing the high level of uncertainty regarding trade and economic policies. Along with a forecasted worsening labor market, the Fed staff's economic outlook for GDP growth in 2025 and 2026 was lowered lower. By the end of the year, unemployment is predicted to surpass its natural rate and continue to do so until 2027. In the meanwhile, additional trade measures caused inflation predictions to be revised higher.

Several participants mentioned surveys and company connections that paused or limited hiring due to policy uncertainty, even if they considered the existing labor circumstances to be "broadly balanced." The majority concurred that the prognosis is largely dependent on the direction of trade policy, even if some perceived dangers of a worsening labor market in the future.

Participants agreed that recent progress on inflation has been patchy, and they pointed out that inflation expectations have increased, which may cause businesses to hike prices. Supply chain interruptions brought on by tariffs were also noted as a possible cause of ongoing inflationary pressures.

The Committee agreed that keeping rates unchanged was the right thing to do because policy remained tight, the economy was growing steadily, and the job market was still strong. They were waiting for further information about trade and budgetary issues.