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NEW YORK — The Federal Reserve held interest rates steady on Wednesday but said the risks of both higher inflation and unemployment had risen, further clouding the economic outlook as the U.S. central bank grapples with the impact of Trump administration tariff policies.
The economy overall has "continued to expand at a solid pace," the Federal Open Market Committee said in a policy statement, attributing a drop in first-quarter output to record imports as businesses and households rushed to front-run new import taxes. The labor market remained "solid," and inflation was still "somewhat elevated," it said.
The direction of policy will depend on which of those risks develop, or, in the more difficult outcome, whether inflation and unemployment increase together and force the Fed to choose which risk is more important to try to offset with monetary policy.
At a press conference after the announcement, Fed Chair Jerome Powell said there was no need to be in a hurry to change policy, and the decision was clear to wait and watch data for any impact from tariffs.
The S&P 500 briefly dipped then turned 0.17% firmer. The yield on benchmark U.S. 10-year notes fell to 4.2791%. The two-year note yield eased then came back to 3.793%. The dollar index dipped then turned 0.35% higher and the euro was down 0.51%
