Fed Leaves Rates Unchanged, Highlights Inflation Risks

On May 7, 2025, Fed released its FOMC Statement. The central bank decided to maintain the target range for the federal funds rate at 4.25% – 4.50%, in line with analyst estimates.

Fed noted that recent indicators suggested that economic activity continued to expand at a solid pace.

Fed will continue to reduce its holdings of Treasury securities, agency debt, and agency morgage-backed securities.

Importantly, Fed said that “the risks of higher unemployment and higher inflation have risen.” This is not surprising as trade wars may put significant pressure on the economy.

U.S. Dollar Index pulled back towards the 99.50 level after the release of FOMC Statement. From a big picture point of view, forex traders stay cautious and wait for Powell’s press conference.

Gold settled near the $3390 level as traders reacted to Fed decision.

SP500 is trying to settle below the 5600 level as traders focus on Fed’s comments about higher inflation and rising unemployment.

Traders should note that Powell’s press conference starts soon. Powell’s words may have a material impact on markets, so traders should be prepared for volatility.

For a look at all of today’s economic events, check out our economic calendar.