Fed Holds Rates Steady as Powell Signals Patience Amid Stagflation Concerns

The Federal Reserve opted to keep interest rates unchanged on Wednesday, holding steady in the target range of 4.25% to 4.5%, even as signs of economic strain begin to mount.

Despite previously signaling two potential rate cuts in 2025, the central bank struck a more cautious tone in its latest update. Officials acknowledged elevated inflation and weaker economic growth, revising down their GDP forecast and noting the growing complexity of the economic outlook.

During his press conference, Fed Chair Jerome Powell emphasized a wait-and-see approach, stating that policymakers are “well positioned to wait” before making further moves on rates. Powell also highlighted early signs of tariff-related inflationary pressure, noting, “We’re beginning to see some effects” in the data.

The Fed’s stance reflects concerns that the economy may be entering a stagflationary phase — marked by slowing growth and persistent inflation — a rare but challenging scenario for central bankers.