Central bankers say economic uncertainty, risks of job losses and inflation have risen.

Jerome Powell, the Federal Reserve chair, arrives to testify on Capitol Hill in Washington on Feb. 11. The Federal Reserve extended its pause on interest rate cuts at its Wednesday meeting, amid concerns that President Donald Trump's tariffs will unleash fresh inflationary pressures. Haiyun Jiang - The New York Times

By COLBY SMITH | THE NEW YORK TIMES

The Federal Reserve left interest rates unchanged for a third meeting in a row Wednesday, as officials stuck to a wait-and­ see approach amid heightened uncertainty about how significantly President Donald Trump's tariffs will raise inflation and slow growth.

The unanimous decision to stand pat will keep interest rates at 4.25% to 4.5%. Rates have been there since December after a series of cuts in the second half of 2024.

The Fed gathered at a highly volatile moment for the economy and the global financial system amid an onslaught of policy changes from Trump just months into his second term in the White House.

In a statement Wednesday, the Fed acknowledged that the labor market was still "solid" but that uncertainty about the economic outlook had "increased further" and that the "risks of higher unemployment and higher inflation have risen."

Since the Fed's last meeting in March, the administration announced and then rolled back aggressive new tariffs as Trump gave countries time to reach trade deals before a July deadline. Still, a 10% universal tariff remains in place, along with additional levies on steel, aluminum and cars. The president has also imposed a minimum tariff of 145% on Chinese goods.

The whiplash has unnerved financial markets, stoking volatility as Wall Street digested the various twists and turns associated with Trump's trade policy and his subsequent attacks on Fed Chair Jerome Powell for ignoring his demands to lower interest rates.

The upheaval has created complications for the central bank. It is struggling to both assess the economic fallout from Trump's policies and game out how it will set monetary policy in an environment in which its goals of maintaining a healthy labor market and keeping inflation low and stable may be in tension with one another.

Officials have grown increasingly worried about how much Trump's policies, which also include slashing spending and deporting immigrants, will sap growth. Some companies have already started to warn about sluggish sales as consumers have turned much more downbeat about the outlook. The fear is that the uncertainty will further chill business activity.

But unlike in the past, the Fed is not in a position to respond to early signs that the economy is weakening by preemptively lowering interest rates. That is because of inflation: Price pressures stemming from the post-pandemic surge have not been fully snuffed out, and now Trump's tariffs risk rekindling them.

It is too early to tell if the tariff-induced jump in inflation will prove to be temporary, or if it morphs into something more persistent. So far, market-based measures of inflation expectations, to which the Fed pays closest attention, suggest that inflation will indeed remain contained after an initial pop. But officials do not want to make the same mistake as they did just a few years ago, when they underestimated how long lasting inflation would prove to be.