The Federal Reserve's (Fed) rate-setting committee unanimously agreed to keep rates steady in January amid concerns about the impact of President Donald Trump's tariffs on inflation.
In the minutes of the FOMC meeting on February 20, US Fed officials need to examine the direction of inflation before determining the next interest rate position.
Potential inflation is likely to be affected by changes in trade and immigration policies by the current administration.
Most recently, Trump announced tariffs on automobiles, pharmaceuticals and semiconductors as high as 25% for foreign countries.
In early 2025, the approval of executive orders in aggressive global tariff setting would trigger a resurgence in US inflation and cancel the Fed's intention to ease policy.
Inflation indicators have been mixed recently, with consumer prices rising more than expected in January but wholesale prices showing softer pressure.
Fed Chairman Jerome Powell tried to avoid responding to speculation about tariffs in his speech. However, his officials expressed concerns and acknowledged that Trump's move was quite risky.
If inflation remains high and the economy shows no major weakness, the Fed is likely to keep interest rates on hold longer than market expectations or perhaps until the end of 2025.
Previously, they have implemented three consecutive rate cuts totaling 100 basis points by the end of 2024.
The Fed's benchmark overnight lending rate is currently targeted at between 4.25% and 4.5%.
