Fed keeps interest rates steady after a stock market sell-off and a brewing trade war

• The Fed left interest rates unchanged at its Wednesday policy meeting. As expected, the Fed reiterated it was in no rush to change monetary policy, instead preferring to wait to determine how fiscal policy would affect the economy. Since President Donald Trump took office two months ago, properly forecasting the U.S. economy has become more difficult given recent trade policies. 

The Federal Reserve left interest rates unchanged for the second time this year. 

After Wednesday's meeting, the interest rates remain between 4.25% and 4.5%. Investors and economists had largely anticipated the Fed would hold off on any changes to monetary policy. 

However, the Fed acknowledged a cloudy economic picture up ahead, which had spread anxiety throughout the market. Stocks plummeted earlier this month and executives on earnings call regularly cited murky outlooks and declining consumer confidence as possible headwinds.

"Uncertainty around the economic outlook has increased," the Federal Open Markets Committee said in a statement after the decision was announced. "The Committee is attentive to the risks to both sides of its dual mandate," of stable prices and a maximum employment.

The Fed plans to wait before making any further moves because the economy was on solid footing at the moment, and because it was unsure what effect fiscal and trade policies would have on its future. Essentially, the economy’s current strength is buying the Fed time as it tries to decide the proper course of action based on the impact the Trump administration's policies could have on the economy. 

During his first two months back in office, President Donald Trump has already started to make good on his campaign pledges to institute widespread tariffs on the U.S.’s trading partners. Many of Trump’s early tariff policies risk upending global trade, though, by cutting off the free market’s flow of goods from one country to the other. The unprecedented nature of some of these proposals markets has thrust considerable uncertainty into economic outlooks, including at the Fed. Further fueling the uncertainty is that Trump has gone back and forth on his policies. Twice already he has implemented and reversed a series of tariffs against Mexico and Canada. 

All that has made it difficult for investors to assess where the economy is headed. Ahead of the meeting, investors worried that even the Federal Reserve would have doubts about its own economic forecasts. 

“The Fed may issue signals of no-confidence,” Macquarie rates strategist Thierry Wizman wrote in an analyst note ahead of the meeting. 

Commentary accompanying Wednesday’s interest-rate decision did not necessarily assuage those concerns, as the Fed didn't offer forecasts about the economy.

The U.S. economy remains relatively sound at the moment. The unemployment rate in February was 4.1%, 10 basis points higher than in January. Inflation, too, remains stable at 2.8%, but still above the Fed’s 2% target. These factors give the Fed enough room to maneuver as it waits to see what happens next. 

"The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid," the FOMC said in its statement. "Inflation remains somewhat elevated."

There have been some early signals the U.S. economy could be bending. In February, the U.S. economy added 150,000 jobs, which, while hardly the mass layoffs that precede a recession, was less than the 170,000 jobs economists expected. There was also an uptick in layoffs that could presage a deeper slackening of the labor market. At the same time, over the last year the last mile of inflation has proven stubborn. That problem could only worsen in the coming months as the Trump administration’s hardline tariff and immigration policies are widely expected to be inflationary. But again, investors are grappling with the fact they have little understanding of how these policies will impact the economy, or if they’ll even go into effect at all. 

“This uncertainty and negativity would normally give the Fed enough fuel to cut interest rates,” Eric Diton, president and managing director of investment firm The Wealth Alliance, told Fortune ahead of the Fed’s meeting. “But, as noted above, there is too much uncertainty at this time for the Fed to act.

That unusual and precarious nature of that economic backdrop was not lost on the FOMC, which continued to reiterate the Fed would act in whatever way was necessary moving forward. 

"The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals," the statement read.

This story was originally featured on Fortune.com