US FED HOLDS RATES STEADY AMID ECONOMIC UNCERTAINTY

WASHINGTON, May 8 (Bernama-Xinhua) -- The US Federal Reserve said it will maintain the federal funds rate at 4.25 per cent to 4.5 per cent on Wednesday amid widespread concerns over sweeping tariffs on major US trading partners, Xinhua reported.

This marks the Fed's third consecutive decision to keep interest rates unchanged since the January and March meetings.

At Wednesday's press conference, Fed Chair Jerome Powell said current rates put officials in a position to take a "wait-and-see" approach to assess the impacts of the tariffs.

"Depending on how things play out, it could include rate cuts, it could include us holding where we are, we just need to see how things play out before we make those decisions," he said.

 Powell noted that the Trump administration's new policies are still evolving and that their economic effects remain "highly uncertain."

 "If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment," Powell said.

 Since the Fed's last meeting in March, US President Donald Trump has slapped extensive tariffs on the country's trading partners.

Recent data showed the US Gross Domestic Product (GDP) shrank in the first quarter, partly due to a surge in imports ahead of the tariffs. Economists told Xinhua that the trend could persist and further weigh on growth.

"Count me in the recession camp. I don't see Trump rowing back his tariff agenda ... far enough to restore certainty to business and confidence to consumers," said Gary Clyde Hufbauer, a non-resident senior fellow at the Peterson Institute for International Economics.

When asked if the Fed will cut rates later this year, Hufbauer said that due to "elevated inflation largely caused by tariffs," the Fed won't cut rates unless unemployment rises by nearly one per cent, as higher interest rates reduce inflation.

Brookings Institution Senior Fellow Darrell West said that though Trump campaigned on reducing inflation, rising tariffs make it unlikely to "deliver on that promise."

Barry Bosworth, economist and senior fellow at the Brookings Institution, said the domestic demand will probably continue to contract in the second quarter, noting that "a fall in GDP seems likely."

 In line with his view, Dean Baker, a senior economist at the Center for Economic and Policy Research, said tariffs will "definitely slow growth," noting that "businesses will be reluctant to invest in such an uncertain environment and many households will put off big ticket purchases."

With the Fed's next meeting scheduled for June 18, economists expect the central bank to keep rates steady.

According to the CME FedWatch tool, there is an 80 per cent likelihood that the Fed will continue to hold the benchmark rate at 4.25 per cent to 4.5 per cent at its next meeting.  

-- BERNAMA-XINHUA