Fed intends to hold rates steady while waiting for more clarity on economic outlook

According to minutes from the latest Federal Reserve (Fed) meeting, US central bank officials believe economic uncertainty justifies their cautious approach to adjusting interest rates.

Policymakers say the risks of both higher inflation and unemployment have increased since their previous meeting in March. This situation could pit the central bank’s goals of stable prices and maximum employment against each other, Bloomberg says.

The Fed forecasts the US labor market to weaken significantly and unemployment to exceed its so-called natural rate this year and remain elevated until 2027. Most participants in the meeting also noted the risk of more persistent than expected inflation.

The minutes emphasized the Fed's willingness to keep interest rates at current levels for some time. This decision is driven by the deteriorating economic outlook due to policy shifts in Washington. Officials lowered their forecasts for US GDP growth in 2025 and 2026. Additionally, they noted a high probability of a recession.