Fed keeps interest rates unchanged

After a two-day policy meeting, on March 19, the Fed announced that it would keep its benchmark interest rate unchanged at 4.25 - 4.5%. In January, the agency made a similar move, after adjusting it three times in a row last year. This shows that the Fed wants to wait for more evidence that inflation is moving towards its 2% target or that the economy is weakening faster than expected.

“Uncertainty surrounding the economic outlook has increased,” the Fed said in its statement. President Donald Trump’s policies in the early months of his term and the upcoming reciprocal import tariffs have made the outlook for the United States more uncertain.

Trump’s import tariffs could push up inflation and stifle growth. The crackdown on illegal immigration is expected to create labor shortages in many industries, while mass layoffs could push some local economies into recession. But efforts to reduce red tape and extend domestic tax cuts are expected to boost growth.

Fed officials have lowered their GDP growth forecast for this year from 2.1% to 1.7%. The unemployment rate may edge up slightly to 4.4%. Import tariffs are also expected to push US inflation up to 2.7% by the end of this year.

The Fed is expected to cut interest rates twice this year, by a total of 50 basis points (0.5%), as economic growth slows. However, in recent speeches, Fed Chairman Jerome Powell and other officials have said they are ready to adjust in either direction, depending on macroeconomic data.

The world’s largest economy is sending mixed signals. While consumers are increasingly cautious about spending, the labor market remains a pillar of the economy. The US unemployment rate remained low at 4.1% last month. The economy added 151,000 jobs and unemployment claims hit a record low.