The Federal Reserve opted to keep interest rates unchanged Wednesday amid persistent uncertainty over the economic impact of recent tariffs and mixed signals from the labor market and inflation trends.

Fed Chair Jerome Powell said the economy remains in “a solid position” but warned that policymakers are navigating uncharted territory following President Trump’s “Liberation Day” tariff announcement in April. “We haven’t been through a situation like this,” Powell said, according to the Wall Street Journal. “We have to be humble about our ability to forecast it.”

Powell’s remarks came during a press conference after the Federal Open Market Committee voted to leave the benchmark interest rate at its current range of 4.25% to 4.5%. In his prepared statement, he emphasized the Fed’s dual mandate to promote stable prices and maximum employment, noting that “elevated uncertainty” is weighing on sentiment across households and businesses.

In a press conference, Powell said recent data shows that inflation has eased but remains above the Fed’s 2% target, with core PCE prices rising 2.6% over the past year. The job market, while still strong, is showing signs of softening. Payroll gains averaged 135,000 per month over the last quarter, and the unemployment rate held steady at 4.2%.

The Journal noted that internal Fed projections revealed a growing split among policymakers. Ten of the 19 officials forecast at least two rate cuts this year, while seven predict no cuts at all, up from four in March. Powell played down the divide, saying, “You can make a case for any of the rate paths” presented.

The uncertainty centers largely on tariffs and whether they will fuel a new round of inflation. Powell said the effects could be transitory or more sustained, depending on how they are absorbed throughout the supply chain. “There are many parties in that chain… each one is going to be trying not to be the one to pay for the tariff,” he explained during the press conference, according to the Journal.

With major economic data yet to come this summer, the Journal asserts that the central bank’s next moves remain uncertain. If tariff-driven price increases take hold or the labor market weakens further, the Fed may act. But for now, officials are choosing caution over commitment. As Powell put it, “The timing for rate cuts could come quickly. It could not come quickly.”