Why the Federal Reserve’s pause could hurt stocks

The Federal Reserve’s recent decision to keep interest rates steady was a tough call. Normally, with the U.S. economy showing signs of weakness, you’d expect a rate cut to boost growth. But the Fed is holding off, mainly because of new tariffs that could push prices higher. This creates a tricky situation for investors.

The Fed’s cautious approach means they’re waiting for clearer signs about how tariffs, trade policies, and other changes will affect the economy. While they still expect two rate cuts by the end of 2025, the uncertainty is making markets nervous.

Stocks could face downward pressure if economic growth slows or inflation spikes unexpectedly. Chair Jerome Powell emphasized that the Fed is ready to act if things worsen, but for now, they’re staying put. This “wait-and-see” stance might protect against inflation but could also dampen stock market gains.

Investors are left wondering how long the economy can handle high rates without stumbling. Geopolitical tensions, like conflicts in the Middle East, add more risks. Higher oil prices or supply chain issues could fuel inflation, making the Fed’s job even harder. For now, the stock market’s path looks bumpy, and investors may need to brace for a rough ride.