The Federal Reserve kept the fed funds rate in a 3.5%–3.75% range, signaling a cautious stance amid rising costs and inflation risks.

Policy makers are urged to stay vigilant and responsive to external pressures to sustain a resilient economy and manage potential inflationary effects.

Inflation dynamics keep a hawkish tilt plausible if price pressures stay elevated, with near-term rate moves depending on how energy-driven inflation and the labor market evolve.

These figures are preliminary estimates from the Commerce Department and will be revised in coming releases.

As long as corporate earnings and growth persist, stocks may stay elevated despite inflation and higher energy costs, though prolonged conflict could raise volatility.

The ongoing war is expected to pose downside risks the longer it lasts, with the Fed delaying potential rate cuts amid higher energy prices.

Overall, the economy faces a stronger rebound tempered by global geopolitical developments that could affect energy markets and consumer costs in the coming months.

The US economy expanded at a 2.0% annualized pace in Q1, helped by a rebound in government spending after a shutdown, though analysts warn the gain may prove temporary as gasoline costs rise from the Iran conflict and households face tighter budgets.

Consumer spending cooled to 1.6% in Q1 from 1.9% in Q4 2025, while business investment surged about 8.7%, likely propelled by AI-related investments.

Fed Chair urged a wait-and-see approach, advocating a hold strategy to assess the impact of the war and tariffs before any rate changes, while voicing concerns about Fed independence.

Analysts describe the economy as showing fragile resilience amid shocks from tariffs and geopolitical tensions, with core pillars weakening over time.

While growth appears solid, underlying vulnerabilities from geopolitics, labor momentum, and consumption patterns suggest notable near-term headwinds.