Federal Reserve Keeps Interest Rates Steady at 4.25%-4.5%

The US Federal Reserve left its benchmark interest rate unchanged on Wednesday, though it indicated the possibility of cuts later this year.

Amid pressing concerns about the impact of tariffs on the slowing economy, Fed policymakers kept their target interest rate within a range of 4.25% to 4.5%, the range it has held since December, according to CNBC.

Markets had been pricing in very low odds of any change at this week's two-day monetary policy meeting.

Alongside the decision, officials updated their interest rate and economic forecasts for this year and through 2027 and adjusted the pace of reductions in their bond holdings.

Despite the uncertain impact of President Donald Trump's tariffs, as well as his ambitious fiscal policy of tax breaks and economic liberalization, officials said they still expect further interest rate cuts of half a percentage point through 2025. The Federal Reserve prefers quarter-point cuts, meaning two cuts this year.

In its statement issued after the meeting, the Federal Open Market Committee noted the increased uncertainty surrounding the current climate.

The document noted that "uncertainty about the economic outlook has increased," adding, "The Committee is alert to the risks facing both sides of its dual mandate."

The Federal Reserve has two primary goals: maintaining full employment and low prices. The committee lowered its collective forecast for economic growth and raised its inflation forecast.

Since taking office in January, the Trump administration has tightened tariffs on its major trading partners, including Canada, China, and Mexico—and then reversed some of them—and threatened to impose reciprocal tariffs on other countries, unsettling US financial markets.

Many analysts fear that Trump's tariffs, civil service job cuts, and immigration plans will lead to higher inflation, hinder economic growth, and complicate the Federal Reserve's plans to reduce inflation to its long-term 2% target while maintaining a healthy labor market.