Fed Keeps Rates Steady Amid Economic Uncertainty

Patricia Franklin

Central Bank

Economic

Cryptocurrency

Summary:

The Federal Reserve holds rates steady amid economic concerns. Market expects a cautious Fed stance.

Key Points:

● The Federal Reserve holds rates steady amid economic concerns.

● Market expects a cautious Fed stance.

● Bitcoin and Ethereum prices remain sensitive to Fed actions.

The Federal Reserve held interest rates steady at 4.25%-4.50% on May 8, 2025, amid growing economic uncertainties linked to tariffs.

The pause in rate changes reflects the Fed's focus on economic stability, with investors and markets responding cautiously to economic implications.

Fed Holds Rates With Inflation and Tariffs in Focus

The Federal Reserve, led by Jerome Powell, kept interest rates stable within the 4.25%-4.50% range. This marks the third consecutive rate hold, consistent with market predictions amid economic uncertainties related to tariffs. Powell acknowledged the Fed's dual concerns: inflation and unemployment, highlighting the potential impact of tariffs.

The ongoing tariff issues could affect inflation and economic growth. Maintaining stable rates signals a cautious approach as the Fed navigates rising risks. Markets reacted by stabilizing interest rates on loans and mortgages, although sentiment remains tentative given potential inflation. Jerome Powell noted, "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."

Market reactions highlighted the Fed's warning of simultaneous inflation and unemployment threats. Bitcoin and Ethereum, sensitive to such policy stances, exhibited minor fluctuations. Powell's emphasis on tariff impacts likely influences future decisions, leaving investors alert to potential actions.

Crypto Markets Adjust to Federal Rate Strategies

Did you know? Current Federal Reserve policies contrast with 2020-2021's low rate period, which significantly boosted crypto markets.

Bitcoin's price stands at $97,217.35 with a market cap of $1.93 trillion. Its 24-hour trading volume increased by 214.83% to $77.91 billion. Bitcoin's price rose 1.16% over 24 hours, 3.30% in a week, and 21.74% over 30 days, signaling fluctuating investor interest despite economic uncertainties.

Bitcoin(BTC), daily chart, screenshot on CoinMarketCap at 22:49 UTC on May 7, 2025.

Coincu research suggests potential growth in crypto as investors seek alternatives amidst uncertain monetary policy. Speculative assets like Bitcoin and Ethereum might gain appeal, with market sentiment closely tied to future Fed actions. Historical data indicates shifts in crypto activity following similar economic events.

Source: CryptoSlate

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Manuel

Central Bank

Forex

The Bank of England is poised to extend its slow run of interest rate cuts on Thursday with investors watching for any signs that it could soon pick up the pace as U.S. President Donald Trump's tariffs weigh on the world economy.

Governor Andrew Bailey and his BoE colleagues have long stressed the need for a gradual and careful approach to lowering borrowing costs, something most analysts say is likely to continue given the scale of uncertainty about the outlook.

The BoE has cut rates just three times so far since last August, moving more slowly than the U.S. Federal Reserve and the European Central Bank due to its concerns about inflationary heat in the jobs market.

Although Britain's economy is far from robust, its growth this year looks set to be faster than in Germany and France.

But Bailey has recently stressed the risks to the economy from the surge in global trade tensions.

On Wednesday, the Fed kept its key interest rate on hold and said uncertainty about the economic outlook had increased with higher risks of a rise in both unemployment and inflation.

A latest quarter-point cut by the BoE is widely expected on Thursday and investors are almost fully pricing in three more reductions by the end of 2025 which would take its benchmark Bank Rate to 3.5% from 4.5% at the moment.

Most economists polled by Reuters last month expected the BoE to remain on its once-a-quarter rhythm which would leave Bank Rate at 3.75% at year-end.

But BofA Global Research analysts said they now saw four BoE rate reductions to come this year with UK inflation set to rise by less than previously thought, in part due to cheaper imports from China which have been effectively shut out of the U.S.

However, it was probably too soon for the BoE to change its stance on the way forward.

"For now, we expect the BoE to retain the careful, gradual and meeting-by-meeting guidance, in the midst of uncertainty," the BofA analysts said.

BNP Paribas Europe economist Dani Stoilova predicted the BoE's new forecasts would show inflation returning to the central bank's 2% target at the end of 2026, a year earlier than the BoE previously expected.

However, Bailey and the rest of the Monetary Policy Committee would probably want to wait and see if Trump's tariffs and retaliation by China and other countries ultimately push up inflation by damaging supply chains, she said.

The BoE is due to announce its May interest rate decision and its latest economic forecasts at 1102 GMT - two minutes later than usual to avoid disrupting a moment of silence to mark the 80th anniversary of the end of World War Two in Europe.

Bailey and other top officials are due to hold a press conference at 1130 GMT.

Source: Reuters

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Manuel

China–U.S. Trade War

Economic

U.S. President Donald Trump on Wednesday suggested China initiated upcoming senior-level trade talks between the two countries and said he was not willing to cut U.S. tariffs on Chinese goods to get Beijing to the negotiating table.

The U.S. announced on Tuesday that Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer will meet with China's top economic official on Saturday in Switzerland, marking an initial step in potential negotiations over a blistering trade war that is disrupting the global economy.

The development was welcomed in financial markets that have been battered by Trump's often-chaotic rollout of his tariff policies, with Wall Street snapping a two-day losing streak.

Prior to Tuesday's announcement, it was far from clear when - or even if - the world's No. 1 and No. 2 economies would engage to defuse the standoff.

Beijing had adopted fiery rhetoric as tensions with Washington ratcheted up, repeatedly saying it would not engage in negotiations unless the U.S. withdrew its tariffs. Its Commerce Ministry had suggested it was the U.S. side that had signaled a desire to hold talks.

"They said we initiated? Well, I think they ought to go back and study their files," Trump said in response to a reporter's question at a White House event where his ambassador to China, David Perdue, was sworn into office.

Asked if he was willing to reduce tariffs to get China to negotiate, Trump said: "No."

"We were losing with China, on trade, a trillion dollars a year - more, actually," Trump said. "You know what we're losing now? Nothing. That's not bad."

The planned talks come after weeks of escalating tensions that have seen duties on goods imports between the world's two largest economies soar well beyond 100%, amounting to what Bessent on Tuesday called the equivalent of a trade embargo.

The impasse, compounded by Trump's decision last month to slap sweeping duties on dozens of other countries, has upended supply chains, roiled financial markets and stoked fears of a sharp downturn in global growth.

Bessent said after the meeting announcement that the talks were about "de-escalation."

Jake Colvin, head of the National Foreign Trade Council, said the current tariffs were untenable and could cause huge damage to both economies if they persisted for months or years.

“I would take it as a positive sign that they're talking, which appears to be the latest step in a series of de-escalatory moves," he said.

Craig Singleton at the Foundation for the Defense of Democracies said it was notable that China agreed to talks without any U.S. concessions.

“The Trump administration did not lift tariffs, pause enforcement actions, or even promise a negotiating roadmap — and yet China agreed to send Xi’s top economic czar, Vice Premier He Lifeng," he said. "It’s acknowledgment that the tariffs are having their intended effect.”

EXEMPTIONS AND RETALIATION

But U.S. officials were also feeling the pressure, including growing public concerns about shortages and rising prices.

Testifying before the House Financial Services Committee, Bessent said the Trump administration is considering exempting car seats, baby strollers, cribs other essential items for transporting children from the 145% tariffs in place on China.

China has also approved some exemptions from its 125% tariffs on U.S. goods.

However, Trump sent mixed signals later, telling reporters he would look at specific industry requests for exemptions, but preferred to keep the duties broader and less complicated.

In 2018, the Trump administration exempted some products produced in China from 25% tariffs, including bicycle helmets and child-safety furniture such as car seats and playpens. However, car seat component parts, cribs, bassinets, diaper bags and wooden safety gates were not exempted.

In Singapore, the European Commission's trade commissioner, Maros Sefcovic, said the bloc would announce on Thursday details of its next countermeasures against U.S. tariffs, if negotiations - not yet begun - ultimately failed.

NEW ENVOY

At the White House event, Trump said he and Perdue, a former Republican U.S. senator from Georgia, would "work together very closely" on U.S. relations with China.

Perdue touted his personal relationship with Trump, something that could raise his stock in Beijing if Chinese officials assess he has a direct channel to the president.

"I want the world to know that I know this man personally. He loves this country, and I am glad to be your man in China," Perdue said.

In nominating Perdue, Trump had said he would be instrumental in implementing a "productive working relationship with China's leaders." During his confirmation hearing in early April, Perdue said the U.S. approach to China must be "nuanced, nonpartisan, and strategic."

Last year, however, Perdue condemned Chinese President Xi Jinping as a "modern-day emperor," writing in an essay that Beijing wanted to "destroy capitalism and democracy" and the U.S.-led world order.

Source: Reuters

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Manuel

Stocks

Central Bank

Trump's administration plans to rescind artificial intelligence chip curbs. The report was confirmed by a Commerce Department spokesperson. The PHLX semiconductor index (.SOX) ended 1.7% higher after falling as much as 1% on the day.

Earlier, the Fed kept rates steady, with the central bank saying the risks of both higher inflation and unemployment had risen, further clouding the economic outlook as the Fed grapples with the impact of Trump's tariff policies.

Trading in stocks was uneven following the Fed statement, until the boost from chipmakers.

"Clearly, the statement is trying to send a message to the White House that their recent actions have made the economic environment more difficult," said Ellen Hazen, chief market strategist at F.L. Putnam Investment Management in Lynnfield, Massachusetts.

"They're saying that the risk of higher unemployment has risen, the risk of higher inflation has risen. And they didn't specifically attribute it to the tariffs, but I think anybody looking at that is going to understand that that's what they mean."

The Dow Jones Industrial Average (.DJI) rose 284.97 points, or 0.70%, to 41,113.97, the S&P 500 (.SPX) gained 24.37 points, or 0.43%, to 5,631.28 and the Nasdaq Composite (.IXIC) gained 48.50 points, or 0.27%, to 17,738.16.

The Dow was boosted by a 10.8% jump in Disney (DIS.N) shares after the entertainment company's quarterly results topped Street expectations.

After the central bank's decision on rates, Fed Chair Jerome Powell acknowledged uncertainty has soured sentiment among people and businesses, but the economy itself is still healthy. In addition, he said rate cuts are possible if supported by economic data but the Fed cannot make preemptive policy changes until there is more clarity.

Markets are still largely pricing in a rate cut of at least 25 basis points from the Fed at its July meeting, according to LSEG data.

Market sentiment was boosted early in the session, a day after Washington announced representatives of the U.S. and China would meet over the weekend in Switzerland for ice-breaker trade discussions following weeks of tit-for-tat tariffs between the economic heavyweights.

The Trump administration has said potential deals with major trading partners are underway, but markets have yet to see talks bear fruit.

Trump said shortly before the Fed statement he was not open to pulling back the 145% tariffs that had been announced.

Financial markets have been whipsawed in recent weeks since Trump announced the tariffs in early April, with the S&P 500 dropping nearly 15% in the days after, only to recover nearly all of the declines.

During most of the session, the Nasdaq was lower in part due weakness in Google-parent Alphabet (GOOGL.O), which closed down more than 7% and served to pull the S&P 500 communication services sector (.SPLRCL) down 1.8% as the worst performer on the session.

A report said iPhone-maker Apple (AAPL.O) was exploring the option of adding artificial-intelligence search options to its web browser, citing an executive. Apple's shares ended 1.1% lower.

Advancing issues outnumbered decliners by a 1.56-to-1 ratio on the NYSE, and by a 1.2-to-1 ratio on the Nasdaq.

The S&P 500 posted 18 new 52-week highs and eight new lows, while the Nasdaq Composite recorded 52 new highs and 114 new lows.

Volume on U.S. exchanges was 15.43 billion shares, compared with the 17.55 billion average for the full session over the last 20 trading days.

Source: Reuters

Risk Warnings and Disclaimers

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Central Bank

Forex

Federal Reserve Chairman Jerome Powell on Wednesday pushed back on political pressure from the White House, telling reporters that President Trump "doesn't affect our doing our job at all" and that "I've never asked for a meeting with any president, and I never will."

The central bank chair and his colleagues also made it clear with their words and actions Wednesday that they are not yet aligned with Trump’s calls for lower rates ahead of any economic slowdown.

Fed policymakers on Wednesday voted unanimously to maintain the Fed's benchmark interest rate in the range of 4.25%-4.5%, a mark reached at the end of 2024 after cutting rates by a full percentage point last fall.

The Fed, Powell said, does not "need to be in a hurry" as it evaluates how Trump’s tariffs will affect employment and inflation and whether talks with America's largest trading partners change the economic outlook.

"I don’t think we can say which way this will shake out," he told reporters during a press conference that followed the Fed's rate decision.

Nevertheless he made it clear he is concerned about the effect Trump's tariffs could have: "My gut tells me that uncertainty for the path of the economy is extremely elevated."

The decision to hold rates steady on Wednesday came after a public campaign by Trump in recent weeks to urge the Fed and Powell to cut rates as his administration rolls out a series of aggressive tariffs on goods imported from major trading partners.

In doing so, the president also lobbed a series of insults at Powell, calling him a “total stiff” and a “major loser” while accusing him of being late to act.

"There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW," the president posted on his social media website, Truth Social, on April 21, saying that "'Preemptive Cuts' in Interest Rates are being called for by many."

He also said that Powell's "termination can't come fast enough" before later clarifying that he had no intention of removing Powell before his term is up in May 2026.

Powell was asked for his reaction to Trump saying he would keep Powell in place and he said he had nothing more to say. He has previously said he intends to serve out his term and that his removal is not permitted by law.

"I've pretty much covered that issue," he said Wednesday.

He was also asked whether Trump's calls for lower rates affect his job or the decision made Wednesday. "Doesn't affect doing our job at all," he said.

Later in the Wednesday afternoon press conference he was asked by Yahoo Finance why he hadn't met with Trump.

"I've never asked for a meeting with any president, and I never will," he said, adding that it is not up the Fed chair to seek out an audience with the occupant of the Oval Office.

"It’s always comes the other way: 'a president wants to meet with you,' but that hasn’t happened."

Source: Yahoo Finance

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Adam

Cryptocurrency

China–U.S. Trade War

The Federal Reserve held interest rates steady on Wednesday as U.S. President Donald Trump’s tariffs continued to cloud the central bank’s economic outlook.

At a target range of 4.25% to 4.5%, the Fed was reluctant to change its benchmark borrowing rate for a fourth straight time. The decision was widely expected, despite weeks of pressure from Trump on Federal Reserve Chair Jerome Powell to start slashing borrowing costs.

In a statement, the Federal Reserve flagged heightened levels of economic uncertainty, underscoring a data-dependent approach to future policy rate adjustments. The central bank added that risks of higher unemployment and higher inflation have recently risen.

“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,” the Fed said. “In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

“The tariff increases announced so far have been significantly larger than anticipated,” Powell said in a post-decision press conference. “All these policies are still evolving, however, and their effects on the economy remain highly uncertain.”

Although Trump’s tariffs have dented consumer sentiment, the U.S. labor market has so far remained robust. U.S. employers added 177,000 jobs in April, surpassing consensus estimates, while the unemployment rate was unchanged at 4.2%, the U.S. Bureau of Labor Statistics said last week.

Inflation has also cooled, inching closer to the Fed’s 2% goal, as Trump’s tariffs threaten to upend trade relationships between the U.S. and other major economies worldwide.

A core measure of the Personal Consumption Expenditures Price Index (PCE), which strips out volatile food and energy prices, has long been the Fed’s preferred inflation gauge. It rose 2.6% in the 12 months through March, marking a slowdown from core PCE’s 3% annual rise in February.

On Wednesday, traders foresaw a 28% chance that the Fed will cut rates at the conclusion of its June meeting, per CME FedWatch.

Among Trump’s tariffs, 145% levies on goods from China are among the heftiest. However, U.S. Treasury Secretary Scott Bessent is scheduled to meet in Switzerland with officials from China later this week, suggesting representatives from both nations are now open to de-escalation.

The People’s Bank of China also moved to support an economy hit by Trump’s 145% tariffs, lowering lenders’ reserve requirement ratio by 50 basis points and reducing its policy interest rate by 0.10 basis points, among other stimulative measures aimed at specific industries.

After an extended period of tariff-fueled turmoil, investors grew relieved last month when the president unveiled a 90-day pause on most reciprocal levies. However, as a July 8 deadline draws closer, investors continue to await for negotiations to result in trade deals.

Powell said that Trump calling for lower interest rates “doesn’t affect” how officials at the central bank are doing their job, or their willingness to wait and see how the economy evolves.

“We’re always going to do the same thing, which is we’re going to use our tools to foster maximum employment and price stability,” he said.

source : decrypt

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Manuel

China–U.S. Trade War

Economic

The Trump administration is considering exempting car seats, baby strollers, cribs and other essential items for transporting children from tariffs on China up to 145%, Treasury Secretary Scott Bessent said on Wednesday.

Bessent said under questioning from Democratic Representative Ayanna Pressley at a House of Representatives Financial Services Committee hearing that those exemptions were under consideration. Pressley, of Massachusetts, noted that more than 3.5 million babies are born annually and almost all strollers are made in China. "Now that cost is going up," she said.

In 2018, the Trump administration exempted some products produced in China from 25% tariffs including bicycle helmets and child-safety furniture such as car seats and playpens. However, car seat component parts, cribs, bassinets, diaper bags and wooden safety gates were not exempted.

Chris Peterson, the CEO of Newell Brands, the maker of Graco strollers, car seats and other children's goods, said last week on an earnings call that approximately 97% of baby strollers and 87% of baby car seats in the U.S. are sourced from China. The company has hiked prices of imported baby gear products by about 20% because of tariffs.

Peterson said the company has not priced in the latest 125% tariff hike and has temporarily halted shipments from China as it sells a few months of inventory.

"At some point, we will begin to run out of inventory. Retailers will begin to run out of inventory and we will turn back on reordering from China," he said. "When that happens, because the whole industry sources from China, we would expect that we and the rest of the industry will take additional pricing to offset the tariff cost."