Nine voting members were in favor of keeping rates on hold.

Two Fed governors, Christopher Waller and Michelle Bowman, voted to lower rates by 25 basis points.

The Fed statement indicates that it still sees high uncertainty from tariffs, and that it remains attentive to both sides of its mandate.

Powell remains particularly concerned about the one-off effect of tariffs on inflation.  While corporations may say that they are attempting not to pass through the costs of the tariffs, these tariffs represent a level of charges on foreign produced goods that the US hasn't experienced since World War II.  Powell indicated in his press conference that the Fed's actions in maintaining the Fed funds rate at the current level is for the purpose of responding to any increase in consumer pricing in a way that ensures that any pricing adjustment does not become a sustained feature of the US economy.  Reading between the lines, one could assume that the Fed may still need to raise rates as part of this cycle.

Economists polled immediately after the release believe that there is a roughtly 38% chance of a quarter point cut in September.  

Powell also spent time in his press conference indicating that an independent Federal Reserve has served the country well, and that he appreciated President Trump's visit, but sees no need to remove the independence of the Fed.

In spite of significant pressure from the President to lower interest rates, the Federal Reserve has held interest rates at a 4.25% to 4.50% target at its May 2025 meeting..

The Fed is stuck because it sees inceased risks on both sides of its mandate.  On one side, the unemployment rate could rise as a result of the administration's tariff and tax policies.   On the other, Trump's announced tariffs create a significant risk of higher prices on just about everything that consumers and businesses purchase.  Should data begin to indicate lower employment and higher prices, we would experience stagflation and the Fed could be prevented from responding to either side of the dual mandate due to the risks of further damaging the other. 

Because of the risks of stagflation and the risk on both sides of its mandate increasing, the Fed's best action for the moment is to be patient and wait and see how the economy evolves with Trump's policies.  It is entirely possible that the Fed will remain in this wait-and-hold position as it watches to see how the economy evolves through the end of the year.

The announced tariff policies pose significant risk to the US economy and to higher prices, but for the moment the Personal Consumption Expenditures (PCE) Price Index is at 2.30% and the Core PCE Price Index is at 2.60%.  These numbers are just above the Fed's 2% inflation target.  It seems as though the Fed would be continuing to lower interest rates right now if we were not dealing with the tariff overhang right now. 

The Federal Reserve's meeting concluded today with the Fed continue to maintain its target rate at 4.25 to 4.50%.

In the Fed's statement, it cites significant progress in getting inflation to its 2% target, but still remains elevated. In fact, the Fed increased its core inflation projection for all of 2025 from 2.50% to 2.80%. The Fed also reduced its growth forecast for 2025 to 1.70%, and sees growth below 1% in 2026.

Importantly, the Fed removed its statements that risks are balanced on both sides of its mandate. In fact, the Fed clearly sees risks everywhere and a slow down in the economy could cause it to reduce short term borrowing costs quickly and decisively.  But for the moment, that is still not here and the Fed still wants to remain cautious on inflation and cannot be certain to proclaim victory prior to new tariffs potentially going into effect on April 2.

At the same time, The Fed is still guiding to two quarter point rate cuts over the course of 2025. While we may not see a rate cut on May 7, we could see one as early as June 18.