Fed Holds Rates Steady Amid Trump Policy Uncertainty

The Federal Reserve kept interest rates unchanged, cautiously monitoring Trump administration policies. Chair Jerome Powell highlighted economic uncertainties, impacted by tariffs. The Fed projects slower growth and higher inflation, keeping a 4.25%-4.50% rate range. Inflation is forecast to reach 2.7% as stock indices rise, and Treasury yields ease.

The Federal Reserve maintained its interest rates on Wednesday, with Chair Jerome Powell signaling a cautious approach amidst uncertainty surrounding Trump administration policies. While a rate cut is anticipated by year-end, Powell emphasized the need for clarity regarding the impact of policies like tariffs on the economy.

The Fed has adjusted its inflation forecast to 2.7% by year-end, acknowledging potential economic impacts from tariffs. Growth projections also saw a downgrade to 1.7% from the previous 2.1%, indicating a slower economic outlook amid elevated risks of inflation and reduced growth.

Markets responded positively to the Fed's policy statement, with stock indices seeing modest gains. The Fed continues to manage its $6.81 trillion balance sheet, as Governor Chris Waller dissented due to changes in this policy area. Adjustments to future rate outlooks remain consistent with prior forecasts, maintaining a watchful eye on inflation and overall economic health.

(With inputs from agencies.)