.jpg)
The Federal Reserve in a closely watched decision Wednesday held the line on benchmark interest rates though still indicated that reductions are likely later in the year. Faced with pressing concerns over the impact tariffs will have on a slowing economy, the rate-setting Federal Open Market Committee kept its key borrowing rate targeted in a range between 4.25%-4.5%, where it has been since December. Markets had been pricing in virtually zero chance of a move at this week’s two-day policy meeting. Along with the decision, officials updated their rate and economic projections for this year and through 2027 and altered the pace at which they are reducing bond holdings.
Despite the uncertain impact of President Donald Trump’s tariffs as well as an ambitious fiscal policy of tax breaks and deregulation, officials said they still see another half percentage point of rate cuts through 2025. The Fed prefers to move in quarter percentage point increments, so that would mean two reductions this year. Investors took encouragement that further cuts could be ahead, with the Dow Jones Industrial Average rising more than 400 points following the decision. However, in a news conference, Federal Reserve Chair Jerome Powell said the central bank would be comfortable keeping interest rates elevated if conditions warranted it. “If the economy remains strong, and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer,” he said. “If the labor market were to weaken unexpectedly, or inflation were to fall more quickly than anticipated, we can ease policy accordingly.”
Source: CNBC
Important note and disclosure: This article is intended to be informational in nature; it should not be used as the basis for investment decisions. You should seek the advice of an investment professional who understands your particular situation before making any investment decisions.
