The Federal Reserve warned that the economy faced growing risks of higher unemployment and higher inflation due to tariff increases when officials agreed to hold interest rates steady on Wednesday. That leaves central bankers to puzzle over which risk to focus on as they set rates. Fed Chair Jerome Powell played down any impressions Wednesday that the central bank was looking ahead to cushion economic weakness from President Trump’s tariffs by cutting rates. And in the U.K., the Bank of England cut its key interest rate by a quarter point.

“If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” Fed Chair Jerome Powell said at a news conference following the central bank's policy meeting.

• Transcript of Powell’s Press Conference
• Federal Reserve Statement Tracker

Powell’s comments, delivered after the Fed agreed to extend its pause on interest rates, laid bare how Trump’s unpredictable and mercurial trade announcements have opened up a divide in monetary policy between the U.S. and its rich-country peers.

• Fed Comments Stir Stagflation Fears
• Powell Says Trump’s Call for Lower Rates ‘Really Doesn’t Affect’ Fed

• Sweden’s Riksbank and Norway’s Norges Bank Hold Rates Steady
• Poland’s Central Bank Joins Europe’s Rate-Cutting Wave

President Trump is expected to announce a framework of a trade deal with the U.K. on Thursday, the first in what the White House hopes is a series of trade agreements since it imposed tariffs against allies and adversaries.

7:02 a.m.: Bank of England interest-rate decision
8:30 a.m.: U.S. Preliminary Productivity and Costs
8:30 a.m.: U.S. Unemployment Insurance Weekly Claims Report - Initial Claims
10 a.m.: U.S. Monthly Wholesale Trade
12 p.m.: U.S. Monthly U.S. Retail Chain Store Sales Index
4:30 p.m.: Federal Discount Window Borrowings

5:55 a.m.: Fed Governor Michael Barr speaks on AI and the labor market at Reykjavik Economic Conference
6:45 a.m.: Fed Governor Adriana Kugler speaks on maximum employment at Reykjavik Economic Conference
8:30 a.m.: Richmond Fed President Thomas Barkin speaks at Loudon County Chamber of Commerce event
10 a.m.: Fed Listens—Perspectives from the Midwest event with Chicago Fed President Austan Goolsbee
11:30 a.m.: Fed Governor Christopher Waller speaks on monetary policy research panel at Hoover Monetary Policy Conference
11:30 a.m.: Richmond Fed President Thomas Barkin participates in Greater Washington Board of Trade event
7:45 p.m.: Fed Governor Lisa Cook speaks on productivity dynamics panel at Hoover Monetary Policy Conference

China's first notable stimulus salvo since the U.S.'s latest tariff hikes didn't set off fireworks in markets. But analysts say it sent a signal: Beijing is taking the threat to the economy seriously, but it's not sounding the alarm yet. The slew of measures announced Wednesday, including rate cuts and liquidity injections, came after data showed signs of stress emerging in the Chinese economy. They also came ahead of its first talks with the U.S. since the rollout of President Trump's tariffs in April. Analysts say the delivery of stimulus suggests some urgency to boost sagging confidence at home, but that Beijing will steer clear of any "big-bang" stimulus that could risk sending signals of weakness ahead of this week's talks. "Chinese authorities will want to enter negotiations from a position of economic strength," said Erica Tay, director of macro research at Maybank. "These support measures will help to strengthen its hand."

 — Jiahui Huang and Fabiana Negrin Ochoa

• Malaysia’s central bank held its benchmark interest rate steady again in a widely expected decision that comes as tariffs threaten economic stability.
• U.S. tariffs will slow growth in Asia this year, but there is a scenario in which the damage will be limited, a top official at the International Monetary Fund says.
• Industrial production in Germany jumped in March, helped by U.S. firms stockpiling imported goods as they prepared for the impact of the Trump administration’s tariffs.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by Michael Maloney in New York. Send your tips, suggestions and feedback to michael.maloney@wsj.com.