Fed holds interest rates steady

The Federal Reserve Chair Jerome Powell announced yesterday the FOMC decision to keep interest rates unchanged at 4.25%-4.5%.

The Fed also downgraded its GDP growth forecast to 1.7% and raised its inflation outlook to 2.8%.

However, Powell hinted at two rate cuts later this year. His comments come amid widespread concerns of economic uncertainty tied to President Donald Trump’s tariff and the administration’s fiscal and immigration policies.

Businesses have warned that higher tariffs will raise prices for consumers.

Buyers are already feeling the pinch. In mid-March, consumer sentiment fell 11% to 57.9 from 64.7 last month. Buyers are worried about how tariffs, layoffs, funding cuts and other regulations would impact the economy. They have already reduced spending, which is causing a slowdown in growth.

Usually, this would have the Fed cut rates, but inflation is above the target of 2%, which is why it adjusted the US GDP forecast and inflation projections.

According to Powell, the role of import duties in inflation is “transitory.” 

Meanwhile, Wall Street rallied on hopes of future cuts, with Dow Jones jumping 400 points.

There is mixed sentiment among economists. Some warn that the US is approaching stagflation, where inflation climbs even as growth slows, while others, like Bank of America, see steady consumer spending.

Amid the uncertainty, the Fed remains cautious, with Powell indicating policymakers will “wait and see” before making any rate cut moves.