Federal Reserve pauses federal funds rate again, as trade and tariffs concerns remain

Amid the many economic data points followed in both the freight economy and also the macroeconomy, including GDP, retail sales, manufacturing output, and employment, among others, one which continues to receive a large amount of attention is the federal funds rate, which comes from the Federal Reserve’s Federal Open Market Committee (FOMC).

That rate received attention this week, when the Federal Reserve announced it again decided to maintain the target range for the federal funds rate at 4.25%-to-4.5%.

In its prepared comments, the Federal Reserve made its case for why it would not make any rate changes at this point—with economic uncertainty ostensibly being the main theme.

“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,” it said. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher employment and higher inflation have risen.”  

This announcement was not unexpected, as it marks the third time in 2025 that rates have remained unchanged, at 4.25%-to-4.5%. This was preceded by three consecutive rate cuts in 2024, including: a reduction to 4.75%-to-4.5% in September; a reduction from 4.50%-to-4.75% in November; and a reduction to 4.25%-to-4.50% in December.

While concerns regarding the economy, driven in large part by ongoing tariffs and trade policy, which many industry stakeholders view as increasing supply chain uncertainty on myriad levels, bringing inflation down remains a key objective for the Federal Reserve, at a time when much remains in flux, for various reasons.

March’s U.S. inflation reading, which was recently issued by the U.S. Bureau of Labor Statistics, fell 0.1% on a seasonally-adjusted basis, for its first decrease going back to May 2020. And on an annual basis, it increased 2.4%, down from February’s 2.8% annual gain. These figures are notable, especially when considering that inflation peaked at 9.1% in June 2022, with that level influenced by pandemic-related factors, including supply chain issues, labor availability, and a shift in consumer spending from goods to services as the economy reopened.

Even though inflation showed a promising March reading, what happens going forward largely remains to be determined, with a major reason for that tied to the ongoing 90-day reciprocal tariffs pause issued by the White House, which is set to expire on July 9. There is a general feeling in supply chain circles that should these tariffs remain in place, it could subsequently result in higher prices, that could, in turn, exacerbate the inflationary, and by extension, economic outlook.

As previously reported, a recently-conducted Logistics Management reader survey of more than 100 freight transportation, logistics, and supply chain stakeholders found that 63% of respondents felt a rate cut would help, with 37% saying it would not.

Reasons cited for the former included: access to cheaper capital helping the sector and various businesses; reducing interest payments and improving cash flow; spurring housing sector growth; and improving consumer demand, among others. And reasons for the latter included: labor issues not subject to interest rates and deflation, among others.

If there are further declines in inflation in the coming months, which is far from a certainty, it could create a situation in which the Federal Reserve begins to feel like it can continue with rate cuts. Should the unemployment rate see further improvement and a trade deal, specifically between the U.S. and China, were to be made, it could potentially lead to a series of 0.25% rate cuts. But, to be clear, that is not where things stand, at the moment.