The Federal Reserve opted to keep interest rates unchanged on Wednesday as officials assess the impact of President Donald Trump’s aggressive economic policies. The decision, announced at the conclusion of the Fed’s two-day monetary policy meeting, reflects the central bank’s cautious approach as it waits for clearer signs on inflation and economic growth.
Fed policymakers still expect to cut interest rates twice this year, according to their latest economic projections. However, there is growing division among officials, with eight now predicting one or no cuts in 2025, compared to only four in December. The Fed’s key borrowing rate remains within the 4.25% to 4.5% range.
In his post-meeting press conference, Fed Chair Jerome Powell acknowledged the heightened uncertainty among businesses and consumers, much of it stemming from the Trump administration’s economic policies. Powell cited new tariffs, mass deportations, and federal workforce reductions as key factors affecting the economic outlook. While deregulation and tax cuts could boost growth, concerns over labor shortages and weaker consumer demand remain.
The Fed’s latest projections indicate weaker-than-expected economic growth and higher inflation in the coming months. Some officials worry that the U.S. could be heading toward stagflation—a period of stagnant growth coupled with rising inflation, reminiscent of the 1970s. Still, Powell reassured that the labor market remains strong, with unemployment at 4.1% and 151,000 jobs added in February.
Trump, however, remains vocal about his dissatisfaction with the Fed’s decision, urging rate cuts as his trade policies take effect. In a post on Truth Social, he reiterated his stance, calling April 2—the expected date for reciprocal tariffs—”Liberation Day in America.” Powell maintained that the Fed will base its decisions on economic data, not political pressure.
Market analysts now face a complex landscape, with economic data painting a mixed picture. While spending appears to be moderating, consumer sentiment surveys suggest growing pessimism. The coming months will be crucial in determining whether the Fed’s strategy holds or if economic conditions force a policy shift.
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