The Federal Reserve maintained its benchmark interest rate at 4.25% to 4.5% on May 7, 2025, defying market expectations of a potential rate cut. This decision came amidst lingering concerns over economic uncertainties stemming primarily from tariffs’ impact on inflation and employment. The Fed Chair, Jerome Powell, acknowledged the rising risks due to these tariffs. Financial markets largely anticipated stability, with CME FedWatch projecting a high likelihood (98%) of no changes in rates. This approach aims to manage inflation and employment goals while navigating market conditions. While some economists suggest this could impact consumer and business sentiment, others warn about potential challenges for businesses due to tariff-related uncertainties. The Federal Reserve’s cautious approach reflects a historical pattern of waiting to assess global economic impacts before adjusting policy. This time, the Fed is aiming to strike a balance between internal and external pressures as they monitor the evolving effects of tariffs across the U.S. economy.