The Federal Reserve decided not to change its main interest rate on Wednesday. They did this even though President Donald Trump wanted them to lower borrowing costs. The Federal Reserve also said that there is now a higher chance of both more people losing their jobs and prices going up. This is an unusual situation that creates problems for the central bank.

The Fed has kept its interest rate at 4.3% for the third meeting in a row. Before this, they lowered it three times at the end of last year. Many experts and investors still think the Fed will lower rates this year. But, the new taxes started by Trump have made the U.S. economy and the central bank's plans much less clear.

At a press conference after the policy was announced, Chair Jerome Powell said that the tariffs have made people and businesses feel less confident, but they haven't really damaged the economy yet. Powell also said that right now, it's too unclear to know how the central bank should react to the tariffs.

Powell said that if the planned increases in import taxes continue, they will likely cause prices to go up, the economy to grow more slowly, and more people to lose their jobs. He also said these effects might be short-term or long-term.

It's unusual for the Federal Reserve to face the problem of both prices going up and more people losing their jobs at the same time.

When a country has high unemployment and prices are rising quickly at the same time, it's often called "stagflation." This situation makes central bankers very worried because it's hard for them to fix both problems. This happened for a long time in the 1970s, when there were problems with oil and the economy slowed down.

However, most economists believe that Trump's taxes on imports could cause stagflation. These taxes might increase the cost of imported goods, leading to higher prices. They could also make companies fire employees because their costs are higher, which would increase unemployment.

The main goals of the Fed are to keep prices steady and make sure most people have jobs. When prices go up too quickly, the Fed usually increases interest rates. This makes it more expensive to borrow money, which slows down spending and helps control rising prices. If many people are losing their jobs, the Fed might lower interest rates to encourage more spending and help the economy grow.

At the start of the year, experts and investors thought the central bank would lower interest rates a couple of times because inflation was going down after the pandemic. Some economists also think the central bank should cut rates because they expect the economy to grow more slowly and unemployment to increase because of new taxes on imported goods. But the head of the central bank said clearly that because the economy is strong now, they can wait and see.

A few months ago, many experts thought the economy would have a "soft landing." This means prices would stop rising so fast and go back to the 2% goal, and most people would still have jobs because the economy was growing well.

But on Wednesday, Powell said it was less probable.

Powell said that if the tariffs were put in place, they would not make more progress towards their goals for at least the next year.

Powell also said the Fed's next step will partly depend on whether prices go up more or if more people lose their jobs.

He said they would wait to see what happens before deciding whether to lower interest rates or keep them the same.

Krishna Guha, an analyst, said the Fed's current opinion of the economy probably means they will wait longer to reduce interest rates. He said that because the Fed sees both possible problems and good points, and describes the economy as strong, it shows they are not planning to lower rates in June. Many economists now believe the Fed might not be ready to cut rates until September.

Trump said in April he would put taxes on goods from about 60 countries, but he stopped most of them for 90 days, except for taxes on China. The government has put a 145% tax on goods from China. The US and China are planning to have their first important talks since Trump began the trade disagreement this weekend in Switzerland.

The central bank's careful approach could cause more problems between the Fed and the Trump government. On Sunday, Trump again asked the Fed to lower interest rates in a TV interview. Trump had stopped saying he would try to fire Powell, but he might change his mind if the economy has trouble in the next few months.

At the press conference, Powell was asked if Trump's wish for lower interest rates affected the Fed. Powell answered, "It doesn't change how we do our job. We only think about economic information, the future, and the possible risks, and nothing else."

If the central bank lowers interest rates, it could make loans for houses, cars, and credit cards cheaper, but this is not certain.

A big problem for the Fed is how taxes on goods from other countries will affect prices.

At the moment, the U.S. economy is generally strong, and rising prices have slowed down a lot since their highest point in 2022. People are buying things at a good rate, although this might be partly because they are buying items like cars before new taxes are added. Companies are still hiring employees regularly, and few people are without jobs.

However, it seems that prices will continue to rise in the coming months. Surveys of companies that make goods and those that provide services both show that they are paying more to their suppliers. Also, a survey by a part of the US central bank found that about 55% of manufacturing companies plan to increase prices for customers because of higher taxes on imported goods.