Fed Holds Interest Rates, Expects Two Rate Cuts This Year

Fed Holds Interest Rates, Expects Two Rate Cuts This Year
The U.S. Federal Reserve (Fed) has decided to keep its benchmark interest rate at 4.25%-4.5% during its March 19, 2025

The U.S. Federal Reserve (Fed) has decided to keep its benchmark interest rate at 4.25%-4.5% during its March 19, 2025 meeting while signaling the possibility of two rate cuts later this year. Despite ongoing economic challenges, including trade tariffs and inflationary pressures, the Fed maintains its cautious approach to monetary policy.

Economic Outlook and Interest Rate Projections
The Federal Open Market Committee (FOMC) has lowered its GDP growth forecast for 2025 to 1.7% from the previous estimate of 2.1%.
Core inflation is now expected to rise to 2.8%, up from 2.5% in previous projections.
The Fed anticipates a total 0.5% rate cut this year, implying two reductions of 0.25% each.
The Dot Plot suggests that the Fed’s benchmark interest rate could fall to 3.9% by the end of the year.
Market Reaction
Following the Fed’s announcement, the Dow Jones Industrial Average surged over 400 points, reflecting investor optimism that lower interest rates will support economic growth and financial markets.

Statement from Fed Chair Jerome Powell
Jerome Powell, the Fed Chairman, emphasized that the central bank will maintain a restrictive monetary policy stance if inflation remains high and economic growth stays strong. However, he also noted that if the labor market weakens or inflation declines faster than expected, the Fed may adjust its policy accordingly.

“If the economy remains strong and inflation does not sustainably move towards 2%, we may keep monetary policy tight for longer. However, if the labor market weakens unexpectedly or inflation declines more rapidly than expected, we are prepared to adjust our policy accordingly.” – Jerome Powell

Future Interest Rate Projections
2025: The Fed is expected to cut interest rates twice.
2026: Two additional rate cuts are likely.
2027: One more reduction is expected before the policy rate stabilizes at around 3% in the long term.

Summary
The Fed has maintained its interest rate at 4.25%-4.5%.
Two rate cuts are expected in 2025.
GDP growth forecast has been lowered to 1.7%.
Core inflation is projected to rise to 2.8%.
The stock market reacted positively, with the Dow Jones surging over 400 points.
While the Fed has held interest rates steady for now, it remains open to future cuts depending on economic conditions and inflation trends.