The Federal Reserve held US interest rates steady on Wednesday even as officials cut their growth forecasts and raised their projections for inflation.
The Fed’s latest set of projections showed officials now expect GDP to expand by 1.7 per cent this year, with prices forecast to rise by 2.7 per cent, amid mounting concerns among investors over the impact of the Trump administration’s trade policies and spending cuts on the world’s largest economy.
Three months ago, officials on the Federal Open Market Committee, the central bank’s policy-setting panel, forecast 2.1 per cent growth for 2025 and estimated the closely watched personal consumption expenditures inflation gauge would end the year at 2.5 per cent.
An FOMC statement on Wednesday, made after US rate-setters maintained the target range for the benchmark federal funds rate between 4.25 per cent and 4.5 per cent, said: “Uncertainty around the economic outlook has increased.”
The latest so-called dot plot projections show Fed officials broadly expect a further one or two quarter-point rate cuts this year — the same as in December — after lowering rates by 1 percentage point in 2024. However, four FOMC members now expect no cuts at all this year, against one in December.
Investors are expecting between two and three quarter-point cuts by the end of 2025.
The Fed also announced that it would slow the pace of its quantitative tightening programme, lowering the amount of US Treasury debt it allows to roll off its balance sheet each month from $25bn to $5bn beginning in April.
Fed governor Christopher Waller voted against the decision to slow quantitative tightening, saying the current decline of $25bn a month remained appropriate.
All of the voting FOMC members backed the decision to keep interest rates on hold.
Read the full article here
