The Federal Reserve kept its key interest rate unchanged Wednesday, brushing off President Donald Trump’s demands to lower borrowing costs, and said that the risks of higher unemployment and higher inflation have risen.
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00:00In support of our goals, today the Federal Open Market Committee decided to leave our
00:20policy interest rate unchanged.
00:23The risks of higher unemployment and higher inflation appear to have risen, and we believe
00:28that the current stance of monetary policy leaves us well-positioned to respond in a timely
00:33way to potential economic developments.
00:37If the large increases in tariffs that have been announced are sustained, they are likely
00:43to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.
00:48The effects on inflation could be short-lived, reflecting a one-time shift in the price level.
00:53It is also possible that the inflationary effects could instead be more persistent.
00:59Avoiding that outcome will depend on the size of the tariff effects, on how long it takes
01:04for them to pass through fully into prices, and ultimately on keeping longer-term inflation
01:08expectations well anchored.
01:12We may find ourselves in the challenging scenario in which our dual mandate goals are in tension.
01:17If that were to occur, we would consider how far the economy is from each goal and the potentially
01:22different time horizons over which those respective gaps would be anticipated to close.
01:28For the time being, we are well-positioned to wait for greater clarity before considering
01:32any adjustments to our policy stance.
01:36The labor market appears to be solid.
01:39Inflation is running just a bit above 2 percent.
01:42So it is an economy that has been resilient and is in good shape.
01:45And our policy is sort of modestly or moderately restrictive.
01:50It is 100 basis points less restrictive than it was last fall.
01:54And so we think that leaves us in a good place to wait and see.
01:57We don't think we need to be in a hurry.
01:58We think we can be patient.
02:00We are going to be watching the data.
02:02The data may move quickly or slowly.
02:04But we do think we are in a good position where we are to let things evolve and become
02:10clearer in terms of what should be the monetary policy response.