The Federal Reserve (Fed) kept its policy interest rates unchanged in the range of 4.25% to 4.50%, ignoring calls from US President Donald Trump for monetary policy easing.
Notably, the majority of FED officials (9 officials) participating in the FOMC committee predict that the average of the base rate range will be 3.875 at the end of 2025. This means that they consider the most likely scenario to be two more cuts in 2025.
It is recalled that last December, FED officials predicted two interest rate cuts in 2025. In addition to the decision on interest rates, the Fed announced a further reduction in the “quantitative tightening” program, through which it gradually reduces the bonds it holds on its balance sheet.
The central bank will now allow the release of only $5 billion of maturing US Treasury bonds each month, instead of $25 billion previously. However, it kept the $35 billion limit for mortgage-backed securities (MBS) unchanged, a level that has rarely been reached since the process began.
In its statement, the Federal Open Market Committee (FOMC) said that economic activity in the United States continued to expand at a steady pace, with unemployment stabilizing at low levels.
However, the Fed admits that inflation in the US economy remains high. It also, while not mentioning the word “tariffs”, speaks of increased economic uncertainty in the near future, amid trade tensions.
At the same time, the Bank will continue to reduce its holdings of US Treasury bonds. Starting in April, however, it will slow the pace of bond reduction, reducing the monthly ceiling for purchasing US Treasury securities from $25 billion to $5 billion.
“The Committee seeks to achieve maximum employment and inflation of 2% over the long term. Uncertainty surrounding the economic outlook has increased, and the FOMC is cautious about the risks. The Committee is firmly committed to supporting maximum employment and returning inflation to its 2% objective,” the FOMC stressed.
The Bank also released its forecasts for the US economy, expecting “low growth”, with growth below 2% over a three-year horizon. As for annual inflation, it is estimated that it will fall to the 2% target in 2027.
In detail:
Powell (FED): No rush to cut interest rates – Inflation, tariffs in focus
The head of the US Federal Reserve (Fed), Jerome Powell, remains on the sidelines for the next steps in monetary policy, reiterating that there is no rush on the part of the Fed to cut interest rates.
In the press conference after the Bank’s meeting and the decision to maintain interest rates in the range of 4.25% to 4.50%, he assessed that the US economy is strong, labor market conditions are stable, however, inflation remains high.
Labor market conditions are generally balanced, they are not a source of inflationary pressures.
PCE prices have now increased 2.8% … but we are close to price stability.
The Fed will be monitoring inflation expectations very carefully,” he noted, while referring to a slowdown in consumer spending, one of the driving forces of the US economy.
He also mentioned the increased uncertainty caused by trade tensions, without mentioning the possible economic impacts.
“We need clarity,” he clarified about the Bank’s next moves.
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