The Federal Reserve announced on Wednesday that it is keeping interest rates unchanged, signaling its cautious approach to the impact of President Donald Trump’s economic agenda. The decision comes after a two-day monetary policy meeting, where officials are weighing the effects of the president’s policies on inflation and the economy.
Fed Chair Jerome Powell acknowledged the uncertainty surrounding consumer spending and business confidence, citing the “turmoil” caused by the Trump administration. However, he emphasized that policymakers will adjust interest rates based on economic data, rather than forecasts. The Fed’s key borrowing rate remains in the 4.25% to 4.5% range.
The decision marks the second time in a row that the central bank has held borrowing costs steady. Officials now expect the economy to be weaker this year than previously thought, with inflation forecast to be higher. This combination of factors raises concerns about “stagflation,” a troubling mix of sluggish growth and accelerating inflation.
Despite the uncertainty, Powell pointed to the labor market as a key bright spot in the US economy, highlighting its resilience despite Trump’s policies. The unemployment rate remains low at 4.1%, and new job applications are historically low. However, economists warn that the likelihood of a recession has increased, although it remains moderate.
Powell also emphasized the impact of Trump’s policies on inflation expectations. The president’s tariffs threaten higher inflation, while his administration’s crackdown on immigration could lead to labor shortages. On the other hand, deregulation efforts and tax cuts could promote growth. The net effect of Trump’s policies on the economy is uncertain, making it difficult for the Fed to predict its impact.
The Fed’s decision will continue to be closely watched as Trump proceeds with significant policy changes, including the rollout of tariffs. Powell said that data shows a moderation in consumer spending, and he believes that long-term inflation expectations are “mostly well-anchored.” However, the recent surge in year-ahead inflation expectations remains a concern.
Source: https://edition.cnn.com/2025/03/19/economy/fed-rate-decision-march/index.html