Federal Reserve Chair Jerome Powell made clear he won’t be rushed into lowering borrowing costs until there’s more certainty on the direction of trade policy, which will have to come from the White House.

Powell and his colleagues held interest rates steady on Wednesday and, in their first meeting since President Donald Trump’s sweeping tariff announcements last month, said the risks of seeing higher inflation and unemployment had risen.

That scenario would force a tough choice, Powell said, between lowering borrowing costs to support the job market or keeping them elevated to contain price pressures. And in the meantime, he suggested uncertainty over the scope and scale of the tariffs — and the outcome of looming trade talks — will keep policymakers on hold for now.

“Absent a decisive turn in the US economic data, the FOMC seems comfortable remaining on hold indefinitely,” said James Egelhof, chief US economist for BNP Paribas, referring to the Federal Open Market Committee. “The FOMC is waiting for conviction of whether the next move is a cut based on the economy moving towards a recession or whether it’s a move towards more restrictive policy due to high inflation becoming entrenched into the economy.”

The rate-setting panel voted unanimously to keep the benchmark federal funds rate in a range of 4.25% to 4.5%, where it’s been since December.

Trump announced a series of larger-than-expected tariffs on April 2 but then paused some of them for 90 days. Levies on imports from China now total 145%. The on-again-off-again nature of the tariffs, paired with the lack of clarity on where trade policy will ultimately settle, has unleashed a wave of uncertainty across the economy.

While the levies are still being negotiated, economists widely expect the expansive tariffs to boost prices and weigh on growth.

Powell has been on the receiving end of severe criticism from Trump for not cutting rates. In his back-and-forth with reporters, the Fed chair emphasized the White House was in a better position to resolve the mounting risks and uncertainty, and indeed appeared to be moving in that direction. US and Chinese officials are set to meet later this week in Switzerland to discuss the tariffs.

“Ultimately this is for the administration to do. This is their mandate, not ours,” Powell said. “It seems we’re entering a new phase where the administration is beginning talks with a number of our important trading partners and that has the potential to change the picture materially.”

Recession concerns have grown in the US, and some businesses have reported pausing investment decisions given the uncertainty. Still, the labor market remains resilient, with employers adding 177,000 jobs in April. Fed officials described labor market conditions as “solid,” according to the statement.

Powell — acknowledging that consumer and business sentiment had darkened amid the erratic tariff announcements — said the hard data still paint a picture of a healthy economy.

Reactive Fed

“I think generally when we watch the Fed, they have much less of the ‘masters of the universe’ vibe going right now,” said Claudia Sahm, chief economist at New Century Advisors. “The Fed is very much at the whim of policies coming out of the White House. They’re reactive.”

Economists say it will take time for the full effect of the new tariffs to work through the economy. So far, the impact has mainly included a sharp decline in sentiment and a surge in imports. The US economy contracted at the start of the year for the first time since 2022, but a gauge of underlying demand stayed firm.

Futures markets show investors still expect about three interest-rate cuts this year, with odds of a cut as early as July at about 85%. Most economists and investors don’t expect the Fed to lower rates at its next meeting in June.

“You’re not going to have data by June that really give you enough information,” said Ellen Meade, a research professor of economics at Duke University and former special adviser to the Fed Board. “The earliest you’d really be thinking about is July, but frankly I think it’s September, and I’m not even convinced they’re going to cut.”