- The Federal Reserve held interest rates steady on Wednesday.
- It comes amid economic uncertainty with Trump’s trade policies.
- The Fed is still expected to cut interest rates later this year.
Americans aren’t getting any more interest-rate cuts just yet.
On Wednesday, the Federal Open Market Committee announced that it would hold interest rates steady for the second time this year, falling in line with market predictions.
It follows the latest consumer price index data, which found that inflation increased 2.8% year-over-year in February, below January’s 3% rate. It marks a step closer to achieving the Federal Reserve’s 2% inflation target. CME FedWatch, which estimates interest-rate changes based on market moves, projected a 99% chance the Fed would hold rates steady since the inflation data release.
Fed Chair Jerome Powell told reporters during a January press conference that even with positive inflation readings, the central bank is still “very much in the mode of waiting to see” how President Donald Trump’s policies will impact the economy.
“We’ll patiently watch and understand and not be in a hurry to get to a place of understanding what our policy response should be until we see how it plays out,” Powell said.
Since taking office, Trump has both implemented new tariffs and used them as tools to achieve policy goals. On March 12, his 25% tariff on steel and aluminum imports went into effect, a day after he eased off of his threat to double the 25% tariff on those metals from Canada until the country agreed to pause its tax on electricity exports to the US.
The back-and-forth nature of the tariffs so far has made it difficult for the Fed to determine how Trump’s trade policy will impact the central bank’s interest rate decisions, Powell said in January.
“We don’t know what’s going to be tariffed. We don’t know for how long or how much, what countries. We don’t know about retaliation. We don’t know how it’s going to transmit through the economy to consumers. That really does remain to be seen,” Powell said.
The FOMC penciled in two interest-rate cuts in 2025, but the Fed could change course depending on how the economy takes shape over the rest of the year. Greg McBride, chief financial analyst at Bankrate, said in a statement that “stubborn inflation and recent economic uncertainty will make them ever more data-dependent in the coming weeks and months.”
Read the full article here
