WASHINGTON – The Federal Reserve held a line on benchmark interest rates in a closely monitored decision Wednesday, but still showed that cuts are likely to be later in the year.
Faced with pressing concerns about influence, tariffs on slowing the economy have been raised, and the rate setting Federal Open Market Committee has maintained its primary borrowing rate in the range of 4.25% to 4.5% since December. The market was priced at a possible virtually zero move at this two-day policy meeting.
In addition to the decision, authorities have updated rates and economic forecasts this year and through 2027, changing the pace of reducing bond holdings.
Despite the uncertain impact of President Donald Trump’s tariffs and ambitious fiscal policy of tax credits and deregulation, officials said they are seeing another half-percent cut through 2025.
Investors have encouraged the Dow Jones industrial average rises more than 200 points after the decision, with further cuts likely to come first. The market is looking to hear more from Federal Reserve Chair Jerome Powell at the 2:30pm ET press conference.
Uncertainty is increasing
In a statement after the meeting, FOMC is paying attention to the rising levels of ambiguity surrounding the current climate.
“Uncertainty about the economic outlook is increasing,” the document said. “The committee is paying attention to risks to both sides of the dual mission.”
The Fed is being charged with twin goals for maintaining full employment and low prices.
The committee downgraded its collective outlook for economic growth and rose due to its inflation forecast. Officials now believe the economy is accelerating at just 1.7% this year, down 0.4 percentage points from its last forecast in December. In inflation, core prices are expected to grow at a rate of 2.8% per year, up 0.3 percentage points from previous estimates.
According to the “dot plot” of staff rate expectations, the view is somewhat taki-minded with prices starting in December. In the previous meeting, only one person had no rating change in 2025 compared to the four people now.
The grid showed that it has not changed its future rate expectations for December. One more equivalent to 2027 reductions was expected in 2026, before the Fed fund rate settled at a level of around 3%.
In addition to determining the rate, the Fed has announced further scaling of its “quantitative tightening” program, which gradually reduces bonds held on its balance sheet.
Currently, the central bank allows mature revenues from $25 billion each month from just $5 billion in monthly. However, the $35 billion cap has not been changed for mortgage-backed securities. This is a level that has rarely been hit since the start of the process.
Federal government’s Christopher Waller was the only opposition to the Fed’s move. However, the statement said that while Waller supported stable retention, he wanted to see the QT program progress the same way as before.
The Fed’s actions follow the busy beginnings of President Donald Trump’s second term of office. Republicans have rattled financial markets with tariffs on tariffs with steel, aluminum and other assortments of goods against their global US trading partners.
Additionally, the administration is threatening another round of even more offensive obligations following a review scheduled for release on April 2.
An uncertainty about what is coming has bleaked the trust of consumers who have raised inflation expectations significantly in recent surveys due to tariffs. The underlying indicators showed that consumers still weathered the stormy political climate, but retail spending rose in February, although less than expected.
Since Trump took office, stocks have been vulnerable, and large averages have permeated as they immerse themselves in the realm of corrections as the government warned of an economic reset from fueled stimuli towards a more private sector-oriented approach.
Bank of America CEO Brian Moynihan rebutted many of the recent pessimistic stories around Wall Street on Wednesday. The head of the US bank, the second-largest by assets, shows that credit card data continues at a robust pace, with Bofa economists hoping that the economy will rise by around 2% this year.
However, there are some cracks shown in the labor market. Non-farm salaries grew at a slower pace than expected in February, and a broad measure of unemployment rates, including those who are not discouraged, have increased half the point of that month during that month since October 2021.
