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Cryptopolitan 2025-03-19 18:23:55

Fed keeps rates unchanged, maintains outlook for 2 cuts in 2025

The Federal Reserve is keeping interest rates where they are after their meeting on Wednesday, where the central bank announced that the federal funds rate will remain between 4.25% and 4.5% while sticking to its plan for two cuts in 2025. Inflation is still above target, but the economy is growing, and unemployment remains low. “Recent indicators suggest that economic activity has continued to expand at a solid pace,” the Fed said in its statement. The central bank’s goal is to maintain maximum employment while bringing inflation down to 2% over time, though the officials did acknowledge that uncertainty is rising, and risks are increasing. Fed slows balance sheet reduction while trimming Treasury runoff The Fed is not just holding rates. It is also adjusting how fast it shrinks its $7.5 trillion balance sheet. Starting in April, the bank will allow only $5 billion in Treasury holdings to mature each month, a sharp drop from the previous $25 billion. The $35 billion cap on mortgage-backed securities remains unchanged. The move gives the central bank more flexibility. Fed Governor Christopher Waller was the only official who disagreed. He wanted to keep rates steady but continue quantitative tightening (QT) at the current pace. Officials made it clear that more changes could come. “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,” said Chair Jerome Powell and the Federal Open Market Committee (FOMC). They will keep tracking labor market data, inflation, and global economic conditions before deciding on their next move. Fed officials split on rate expectations The dot plot, which shows where officials think rates will go, revealed a change, as four policymakers now expect no cuts in 2025, up from just one at the last meeting. But most officials still anticipate two rate cuts next year, with another two in 2026 and one more in 2027, and the long-term expectation is for rates to settle at around 3%, according to the Fed’s statement. “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,” said the Fed in its Wednesday statement. Markets are paying attention. The decision comes as President Donald Trump begins his second term as president, adding trade tensions into the mix. His administration has already hit steel, aluminum, and other imports with tariffs and is planning more in April. Recent surveys show that consumers are expecting higher inflation because of these policies. Retail spending rose in February, but not as much as expected. Brian Moynihan, CEO of Bank of America, said that consumer spending remains steady. “Our economists expect the economy to grow around 2% this year,” he said. But warning signs are emerging. Nonfarm payrolls grew at a slower pace in February, and the broadest measure of unemployment jumped 0.5 percentage points, reaching its highest level since October 2021. Stocks have been taking a beating since Trump returned to office thanks to his unpredictable economic policies, and major indexes S&P 500 as well as the Dow Jones are moving in and out of correction territory, as seen in data from CNBC. Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now

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