The US central bank held interest rates as it said Trump tariffs have risked higher inflation and unemployment amid “so much” uncertainty.
The announcement is likely to anger President Donald Trump, who has made the taxes on imports one of his signature policies and had threatened to fire the Federal Reserve chair, Jerome Powell.
On Wednesday, the Federal Reserve, known as the Fed, held rates at 4.25%-4.5%. Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.
It means borrowing costs have remained unchanged for Americans, something Mr Trump had wanted to reduce.
Interest rates have been raised by the Fed to bring down high inflation in the wake of Russia’s invasion of Ukraine and the supply chain crisis brought about by COVID-19 lockdowns.
Fears of inflation rising higher as tariffs make goods on US shelves costlier, and of job losses from reduced spending, led the Fed to remain cautious.
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The full effect of the tariffs is “highly uncertain”, Mr Powell said on Wednesday evening, as those announced so far have been “significantly larger” than anticipated.
Image: US Federal Reserve Chair Jerome Powell speaks during a news conference. Pic: Reuters
A 90-day pause was announced on the suite of taxes Mr Trump imposed on countries across the world, on top of the 10% base tariff, which has remained in place.
A trade war was kicked off between China as the countries escalated tariffs on each other to nearly 150%. Taxes on cars and some metals entering the US are still subject to a 25% tax.
If these tariffs remain, Mr Powell made the strongest statement yet that goods overall would become more expensive.
“If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment,” he said.
“The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent,” he added.
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1:42
Trump’s tariffs: What you need to know
Uncertainty over the economic outlook also caused consumer and business sentiment to fall, “largely reflecting trade policy concerns”, Mr Powell said.
Despite Mr Trump appointing Mr Powell to the Fed chair position during his first term, the president has repeatedly spoken out against Mr Powell.
Markets rallied after Mr Trump ruled out ousting Mr Powell at the end of April.
It comes as the UK central bank, the Bank of England, is poised to cut interest rates on Thursday afternoon. The base rate is anticipated to drop to 4.25% before falling to 3.5% by the end of the year.
Donald Trump could meet Vladimir Putin in person as early as next week to discuss a ceasefire in Ukraine, a White House official has said.
They said the meeting would be conditional on the Russian president meeting his Ukrainian counterpart Volodymyr Zelenskyy, Sky News’s US partner network NBC News reported.
It came days before the White House’s deadline for Russia to reach a peace deal with Ukraine or face severe economic penalties, which could also target countries buying its oil.
Asked during a news conference at the White House if the talks would take place, Mr Trump said: “There’s a very good prospect that they will.”
He said it had not been determined where the talks would take place, but added: “We had some very good talks with President Putin today.”
However, he said: “I’ve been disappointed before with this one.”
Asked if Mr Putin made any kind of concession to lead to the development, Mr Trump did not give much away, but added: “We’ve been working on this a long time. There are thousands of young people dying, mostly soldiers, but also, you know, missiles being hit into Kyiv and other places.”
Trump might finally be a step closer to ending the war
Seven hours is a long time in US politics.
At 10am, Donald Trump accused Russia of posing a threat to America’s national security.
At 5pm, Trump said there was a “good prospect” of him meeting Vladimir Putin “soon”.
There had, he claimed, been “great progress” in talks between his special envoy Steve Witkoff and the Russian president.
It’s difficult to gauge the chances of a meeting between the two leaders without knowing what “great progress” means.
Is Russia “inclined” towards agreeing a ceasefire, as Ukraine’s president now claims?
Is Putin prepared to meet with his Ukrainian foe Volodymyr Zelenskyy, too?
The very fact that we’re asking those questions suggests something shifted on a day when there was no expectation of breakthrough.
Trump repeatedly vowed to end the war within 24 hours of becoming president.
On day 198 of his presidency, he might, just might, be one step closer to achieving that.
More tariffs ‘could happen’
Mr Trump also said he could announce further tariffs on China similar to the 25% he announced on India over its purchases of Russian oil.
“Could happen,” he said, after saying he expected to announce more secondary sanctions intended to pressure Russia into ending its war with Ukraine.
Earlier, he imposed an additional 25% tariff on Indian goods, on top of a previous 25% tariff, over its continued purchases of Russian oil.
India’s foreign ministry spokesperson said the additional tariffs were “unfair, unjustified and unreasonable”.
Image: Vladimir Putin welcomes Steve Witkoff during a meeting in Moscow. Pic: Sputnik/Reuters
It came after Mr Putin held talks with Mr Trump‘s special envoy Steve Witkoff in Moscow, with the meeting lasting around three hours.
In a post on Truth Social, Mr Trump said Mr Witkoff “had a highly productive meeting” with Mr Putin in which “great progress was made”.
He said he had updated America’s European allies, and they will work towards an end to the Russia-Ukraine war “in the days and weeks to come”.
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Correspondents in Washington and Moscow break down a busy day of diplomacy
‘The war must end’
Mr Zelenskyy later said he and Mr Trump spoke on the phone after the meeting. He said “European leaders also participated in the conversation” and “we discussed what was said in Moscow”.
He added: “Our common position with our partners is absolutely clear: The war must end. We all need lasting and reliable peace. Russia must end the war that it started.”
Mr Zelenskyy later said: “It seems that Russia is now more inclined to agree to a ceasefire.”
He added that the pressure on Moscow “is working”, without elaborating, and stressed it was important to make sure Russia does not “deceive us or the United States” when it comes to “the details” of a potential agreement.
Five soldiers have been injured in a shooting at an army base in the US – with authorities placing the location in “lockdown”.
“The installation was locked down at 11.04am and law enforcement is on the scene,” the Fort Stewart base in Georgia wrote on Facebook.
It said the incident took place at the 2nd Armoured Brigade Combat Team area and casualties had been reported.
The gunman has been arrested and there is “no active threat to the community”, the base added.
“The incident remains under investigation and no additional information will be released until the investigation is complete,” it said. The lockdown was lifted at 12.10pm local time.
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Governor Brian Kemp said he and his family were “saddened by today’s tragedy”.
“We are keeping the victims, their families, and all those who answer the call to serve in our hearts and prayers, and we ask that Georgians everywhere do the same,” he wrote on X.
Fort Stewart is around 25 miles (362km) southeast of Atlanta and is the largest US Army base east of the Mississippi River. It houses thousands of soldiers assigned to the army’s 3rd Infantry Division and their family members.
The fort’s three schools, which have nearly 1,400 students, were also placed under lockdown. Three schools outside the base also took steps similar to a lockdown “out of an abundance of caution”.
Donald Trump has been briefed on the shooting and the US president is monitoring the situation, White House press secretary Karoline Leavitt said in a post on X.
America’s vaccine-sceptic health secretary has announced $500m (£375.8m) worth of cuts to their development in the country.
The US health department is cancelling contracts and pulling funding for jabs to fight viruses like COVID-19 and the flu, it was announced on Tuesday.
Robert F Kennedy Jr, known as RFK Jr, said 22 projects developing mRNA vaccines will be halted. It is the latest in a series of decisions to reduce US vaccine programmes.
The health secretary has fired the panel that makes vaccine recommendations, reduced recommendations for COVID-19 shots, and refused to endorse vaccines despite a worsening measles outbreak.
RFK Jr claims the US will now prioritise “safer, broader vaccine strategies, like whole-virus vaccines and novel platforms that don’t collapse when viruses mutate”.
Responding to the announcement of cuts, Mike Osterholm, a University of Minnesota expert on infectious diseases and pandemic preparations, said: “I don’t think I’ve seen a more dangerous decision in public health in my 50 years in the business.”
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Is US politics fuelling a deadly measles outbreak?
Dr Paul Offit, a vaccine expert at Children’s Hospital of Philadelphia, said RFK Jr’s move was short-sighted and that mRNA vaccines “certainly saved millions of lives”, including during the pandemic.
MRNA vaccines work by delivering a snippet of genetic code into the body that triggers an immune response, rather than introducing a real version of the virus.
According to the UK Health Security Agency, the “leading advantage of mRNA vaccines is that they can be designed and produced more quickly than traditional vaccines”.
Moderna, which was studying a combo mRNA shot that can tackle COVID and flu for the US health department, previously said it believed mRNA could speed up production of flu jabs compared with traditional vaccines.