Federal Reserve officials are caught between two major concerns: persistent inflation driven by trade policies and the growing risk of recession.
At their May 6-7 meeting, Fed officials decided to maintain interest rates at 4.25%-4.5% for the third consecutive meeting, choosing a cautious “wait-and-see” approach.
While officials worry that inflation could become entrenched in consumer expectations, Fed staff warned that recession is nearly as likely as continued growth.
The unemployment rate is expected to rise significantly by year-end and remain elevated through 2027. Markets anticipate two rate cuts this year, with the first potentially coming in September.