The Fed Holds Interest Rates at 4.25%–4.5% in May 2025

The Federal Reserve, the central bank of the United States, maintained its benchmark interest rate at 4.25%–4.5% on Wednesday, May 7, 2025 (local time), or Thursday, May 8, 2025 (Indonesia time).

In a written statement, the Fed explained that indicators of US economic development, including the unemployment rate, have remained stable at low levels in recent months, and labor market conditions remain solid. However, inflation has increased slightly.

The Federal Open Market Committee (FOMC) stated its aim to achieve maximum employment and inflation at a rate of 2% in the long term.

"Uncertainty about the economic outlook has increased. The Committee is mindful of risks on both sides and judges that the risks of higher unemployment and higher inflation have increased," the Fed wrote, as quoted on Friday, May 9, 2025.

According to Katadata, Fed Chair Jerome Powell remains confident that the economy is still in a solid position. Current monetary policy puts the Fed in a good position to respond in a timely manner to potential economic developments.

Powell also noted that Trump's tariff policy remains a source of uncertainty. This situation underscores the need for the Fed to adopt a wait-and-see approach.

"I think we can't say... which way this is going to go. I think there's a lot of uncertainty about, for example, where tariff policy is going to end up," he said, as quoted by Katadata from Reuters.

Asish Shah, Head of Public Investing at Goldman Sachs Asset Management, said that for now, the Fed remains in a holding pattern while waiting for uncertainties to subside.

"The better-than-feared recent jobs data has supported the Fed's holding pattern, and the onus is on the labor market to weaken sufficiently to restart its easing cycle," he said.

The Fed's interest rate setting has remained unchanged since December as officials struggle to gauge the impact of President Donald Trump's import tariffs. This policy has raised the prospect of higher inflation and slower economic growth this year.