While reductions may well be rolled out later this year, the Federal Reserve has just announced that for now it is planning to keep interest rates in a holding pattern range of between 4.2% and 4.5%.
The announcement comes as the members of the Federal Open Market Committee weighed the impact of continuing Trump administration federal government reduction moves and the possibility of new tax breaks later this spring.
In a news conference, Federal Reserve Chairman Jerome Powell remarked, “If the economy remains strong, and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer.”
Powell added that “if the labor market were to weaken unexpectedly, or inflation were to fall more quickly than anticipated, we can ease policy accordingly.”
Contrary to many forecasters, Powell also questioned the possible impact that the Trump administration’s increased tariff policies may have on the overall national economy, saying those tariffs will most likely have a “transitory” effect, but not one that will endure for very long.
The Fed is additionally anticipating slower economic growth later this year and a slight increase in unemployment, prompting the Investor’s Business Daily to note: “That combination of slower growth and a higher jobless rate may prove conducive to rate cuts, as long as the Fed doesn’t see risk that a tariff-led rise in inflation could have staying power.”
“Stock investors breathed a sigh of relief,” upon hearing the latest forecasts from Powell, remarked the New York Times, reporting that in the days leading up to Powell’s announcement, “investors were focused on whether central bankers would express concern about the path forward for the U.S. economy.”
The Federal Reserve’s latest path forward comes as the Trump administration’s increased tariffs have had the effect of “sparking a global trade war,” says the Financial Times, which added: “Surveys have shown US consumers and businesses are fretting over the levies, which have depressed demand and increased price pressures.”
In officially announcing the 4.2% to 4.5% rate range, the Federal Open Market Committee said it will continue to “carefully assess incoming data, the evolving outlook, and the balance of risks.”
March 20, 2025
By Garry Boulard
Logo courtesy of Board of Governers of the Federal Reserve System
