The Federal Reserve announced on Wednesday at 2:00 p.m. Eastern Time, following its two-day monetary policy meeting, that it would keep the benchmark interest rate unchanged at 4.25% to 4.5%. It also revealed plans to slow the pace of its balance sheet reduction starting in April.
The Fed released a statement from the Federal Open Market Committee (FOMC), which projected rising inflation in the U.S. and lowered its economic growth outlook.
Despite signs of stagflation, the Fed maintained its expectation for two rate cuts in 2025, aligning with the dovish signals from its aggressive rate-cutting stance last September.
The statement noted that recent indicators point to “continued solid economic expansion.” It added that unemployment has remained low in recent months, labor market conditions are robust, and inflation remains “slightly elevated.”
The Committee reaffirmed its commitment to achieving maximum employment and returning inflation to its 2% target over the long term. It acknowledged increased uncertainty in the economic outlook and pledged to closely monitor “two-way risks” to its dual mandate of employment and inflation.
To support these goals, the Fed decided to hold the federal funds rate steady. When assessing future adjustments, the Committee vowed to carefully evaluate incoming data, evolving economic conditions, and risk balances. It will continue reducing holdings of U.S. Treasuries, agency debt, and mortgage-backed securities. Starting in April, the monthly redemption cap for Treasuries will drop from
25 billion to 50 billion, while the $35 billion cap for agency debt and mortgage-backed securities remains unchanged.
The Fed emphasized its resolve to support maximum employment and steer inflation back to 2%. It will adjust policy as needed if risks emerge that impede these objectives, taking into account labor market dynamics, inflation pressures, financial developments, and global factors.
Powell Mentions Tariffs, Acknowledges Trump Policy Impact
During the subsequent press conference, Fed Chair Jerome Powell mentioned “tariffs” for the first time, acknowledging their economic implications under Trump-era policies.
When asked about revisions to inflation forecasts and the role of tariffs, Powell stated it was “difficult to parse how much inflation is driven by tariffs,” but admitted that “clearly, a meaningful portion is coming from tariffs.”
Powell also noted that policies from the Trump administration would impact the economy but refrained from making definitive judgments. Analysts interpreted this as an effort to avoid speculation, with Powell emphasizing reliance on monthly data to guide decisions.
Throughout the press conference, Powell repeatedly highlighted “uncertainty,” particularly regarding tariffs’ potential effects on the U.S. economy and risks to the Fed’s employment and inflation outlook.
“Uncertainty is very elevated at the moment,” Powell said. “We are not in a hurry to act on rates,” adding that the Fed is “prepared to wait for greater clarity.”
Market Turbulence Persists
In recent weeks, major stock indices have experienced roller-coaster swings, weighed down by weak economic data and uncertainty over Trump’s tariff policies. The S&P 500 entered correction territory last week, while the Nasdaq Composite remains deeply in correction—down over 10% from recent highs.
Post time: Mar-20-2025