FOMC Holds Its Benchmark Interest Rate as Uncertainty Around the Economic Outlook Increases

Until there is a clearer picture of the impact the Trump Administration’s tariffs will have on a slowing economy, the Federal Open Market Committee (FOMC) decided to hold its benchmark interest rate at a range of 4.25% to 4.5%. Further prompting decisions by Fed officials is the anticipation of potential upward pressure on prices that could further affect consumer spending, which has already shown some moderation. However, the Fed said they still see “another half percentage point of rate cuts through 2025, but taking a more cautious stance, prefer to “move in quarter percentage point increment, so that would mean two reduction this year.” Additional decisions by officials led to an update of their rate and economic projections for 2025 through 2027, lowering their projected pace of the economy’s acceleration to 1.7% this year — down 0.4 percentage points from the last projection in December. The pace at which the Fed reduces its bond holdings as part of its “quantitative tightening” program was also lowered from the central bank’s previously allowed $25 billion in maturing proceeds from Treasurys to roll off each month to just $5 billion, but a $35 billion cap on mortgage-backed securities was unchanged, since the level has rarely been reached since starting the bond reduction process.  Response within the market to the encouraging news of further rate cuts fueled a rise in the Dow Industrial Average by more than 400 points, but Federal Reserve Chair Jerome Powell cautioned that “the central bank would be comfortable keeping interest rates elevated if conditions warranted it.”

Source:    https://www.cnbc.com/2025/03/19/fed-rate-decision-march-2025.html