Federal Reserve Keeps Interest Rates Steady Amid Economic Uncertainty

Washington, D.C. — The Federal Reserve held its benchmark interest rate steady on Wednesday, reflecting concerns about economic uncertainties stemming from the Trump administration’s trade policies. Chair Jerome Powell emphasized an increase in economic outlook uncertainty, stating, “The committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’s goals.”

The decision to maintain the federal funds rate in a range of 4.25% to 4.5% coincided with a downward revision in economic growth forecasts. The Fed lowered its expectations for the nation’s gross domestic product (GDP) to expand by only 1.7% this year, down from December’s projection of 2.1%.

Unemployment is projected to rise to 4.4%, up from March’s previous estimates. Inflation, meanwhile, is anticipated to edge up slightly to 2.7%, compared to the current level of 2.5%. Powell remarked at a news conference, “Inflation has started to move up, partly in response to tariffs. And there may be a delay in further progress over the course of this year.”

He characterized any anticipated increase in inflation due to tariffs as likely “transitory,” though he acknowledged challenges in isolating the impacts of tariffs from other inflationary pressures. Economists have flagged the Trump administration’s stringent trade practices, particularly steep tariffs on Canada and Mexico set to take effect on April 2, as potential inflationary catalysts that could negatively affect economic activity.

“Acknowledging the likely direction of travel in terms of policy from the Trump administration, FOMC participants revised up their projections for inflation while revising down their projections for GDP,” said Stephen Brown, deputy chief North America economist with Capital Economics.

Powell noted that while the chances of a recession were previously seen as extremely low, they have increased slightly, although they remain minimal. “It has moved up, but it’s not high,” he elaborated during his briefing.

The Federal Open Market Committee’s (FOMC) recent decisions reflected investor sentiment, as many anticipated a rate cut this month due to economic uncertainties creeping into the financial markets. Carl Weinberg, chief economist at High Frequency Economics, commented in a research note, “What holds the FOMC back from continuing to push interest rates lower at this moment is uncertainty about the Trump administration’s economic policies.”

Despite these uncertainties, Powell’s remarks found a positive reception on Wall Street, with stocks gaining about 1% across major indexes following the FOMC announcement.

Looking ahead, most economists project interest rate reductions in the near future, contingent upon inflation trends aligning more closely with the Fed’s 2% annual target. The Fed’s dot plot suggests a median projection for the federal funds rate at 3.88% by the end of 2025, indicating an expectation of at least 50 basis points in cuts this year.

The Associated Press contributed to this report.