With the uncertainty of the impact of the tariffs on the economy, the Federal Reserve held interest rates at the same rate on Wednesday after the Federal Open Market Committee meeting.
Rates will remain at 4.25 to 4.5 percent. The rate has stayed at that level since December after a fourth straight meeting with no change.
“At today’s meeting, the committee decided to maintain the target range for the federal funds rate at 4.25 to 4.5 percent and to continue reducing the size of the balance sheet,” said Federal Reserve Chairman Jerome Powell. “The new administration is in the process of implementing substantial policy changes in four distinct areas – trade, immigration, fiscal policy and regulation. The tariff increases announced so far have been significantly larger than anticipated. All of these policies are still evolving, and their effects on the economy remain highly uncertain. As economic conditions evolve, we will continue to determine the appropriate stance of monetary policy based on the incoming data, the outlook and the balance of risks.”
Powell stressed the strength of the economy, with low unemployment and lower inflation numbers, allowed the Fed an opportunity to wait for more data on the impact of the tariffs. Unemployment is at 4.2 percent and the economy added 177,000 jobs in April. The latest consumer price index showed the annual inflation rate was at 2.4 percent.
“We think we are in the right place to wait and see how things evolve. We don’t feel like we need to be in a hurry. We feel it’s appropriate to be patient,” Powell said.
“There’s so much uncertainty. If you talk to businesses or market participants or forecasters, everyone is just waiting to see how developments play out. And then we will be able to make a better assessment of what the appropriate path for monetary policy is.”
The tariffs, which were announced in April by the Trump Administration and then reduced outside of trade with China, have provided added uncertainty, Powell indicated. Compared to March, the committee judged that risks to higher unemployment and higher inflation have increased due to the tariffs.
“I think there’s a great deal of uncertainty about, for example, where tariff policies are going to settle out and also when they do settle out, what will be the implications for the economy, for growth, and for employment. I think it’s too early to know that. I mean, ultimately we think our policy rate is in a good place to stay as we await further clarity on tariffs and ultimately their implications for the economy,” Powell said.
Used auto finance rates dipped slightly in April to 14.41 percent from 14.75 percent in March, according to data from Cox Automotive.
