Federal Reserve keeps rates unchanged, warns of inflation risks

The Federal Reserve held interest rates steady at 4.25 percent to 4.5 percent citing that 'uncertainty' around economic outlook has risen in the last few weeks. It also sounded concerns over upside risks to inflation amid Trump's tariff plans.

To that effect, the rate setting panel raised the median estimate for core inflation to 2.8 percent from 2.5 percent by year-end. Their outlook for 2025 economic growth softened to 1.7 percent from 2.1 percent. They also revised their unemployment forecasts higher at 4.4 percent by end of 2025, up from 4.3 percent in December.

Fed Chair Jerome Powell also stated that assessing the impact of tariffs on inflation remains challenging at this stage. However, current surveys indicate that tariffs are pushing inflation expectations higher. He also noted that inflation has begun to rise, in part due to the effects of tariffs.

Despite that,  policymakers reassured their expectation of two rate cuts in 2025. The latest rate projections revealed that a slim majority of Fed officials anticipate a total of half a percentage point in rate cuts this year, implying two quarter-point reductions, unchanged from their December forecast.