The Federal Reserve has left interest rates unchanged at 4.25% to 4.5%, citing increased economic uncertainty and reduced growth forecasts. The decision reflects the central bank’s cautious approach amid a volatile policy environment, with trade and other areas experiencing extreme flux.
The median Fed official now expects 1.7% GDP growth this year, down from 2.1% in December projections. However, interest rate cuts are still expected, with two cuts anticipated for the year.
Fed Chair Jerome Powell acknowledged that President Trump’s policy changes, including tariffs and deregulation, will likely impact the economy. However, he noted that it’s difficult to precisely assess inflationary pressures from tariffs.
The Fed’s decision comes as economic survey-based indicators point to weakness in the economy, but broad measures like unemployment remain steady. Powell cautioned that the relationship between survey data and actual economic activity has been loose, citing instances where people have downplayed concerns about the economy only to make large purchases later on.
New projections also reflect heightened worry on both growth and inflation, with GDP forecasts downgraded and inflation expectations increased to 2.7% this year. The Fed will begin withdrawing pandemic-era support for the financial system more slowly than previously planned, allowing its portfolio of Treasury securities to fall by $5 billion a month instead of $25 billion.
Governor Christopher Waller was the sole dissenter on balance sheet policy, agreeing with the decision to keep interest rates unchanged but differing on the pace of asset sales.
Source: https://www.axios.com/2025/03/19/federal-reserve-interest-rates