The Federal Reserve kept interest rates steady on Wednesday, maintaining its benchmark range at 4.25%–4.50% for the third consecutive meeting despite intensifying calls from President Donald Trump for a rate cut. Central bank officials signaled growing concern about the economic outlook, citing mounting risks of both elevated inflation and rising unemployment driven by ongoing trade tensions.

Wall Street initially hoped for a dovish pivot, but those hopes were dashed following the Fed’s announcement. The S&P 500 slipped 0.3% and the Nasdaq lost 0.5%, while the Dow managed to eke out a 200-point gain, lifted by a strong earnings report from Disney.

In its policy statement, the Federal Open Market Committee highlighted “increased uncertainty about the economic outlook,” pointing directly to the inflationary impact of President Trump’s expanding tariff strategy. As trade tensions escalate, policymakers are growing more cautious, reluctant to either raise or lower rates until there’s more clarity on how these developments will affect growth, prices, and employment.

While inflation remains near the Fed’s 2% target, officials warned that recent data suggest a risk of overheating, especially if new tariffs push consumer prices higher. At the same time, businesses are becoming more cautious with hiring, and unemployment could edge higher if the economic headwinds persist.

The Fed’s decision to stay the course reflects a delicate balancing act — responding to market and political pressure while guarding against long-term risks. For now, rate cuts are off the table, and the central bank is urging investors to brace for a bumpy ride as policy uncertainty clouds the economic horizon.