The Fed Hits Pause. What’s Next?
The federal funds rate will remain at a range of 4.25 to 4.5 percent. But for how long?
In keeping with its first decision of the year, the Federal Reserve has yet again elected to keep interest rates unchanged. The federal funds rate will remain at a range of 4.25 to 4.5 percent, the central bank announced on Wednesday afternoon.
Indeed, the markets had priced in a pause and investors weren’t on the edge of their seats to see how the rate might change. The watch-worthy element of this Federal Open Market Committee Meeting, contrarily, was Fed Chair Jerome Powell’s comments about how the current administration could impact the economy and future rate decisions.
Members of the Federal Reserve released data at the latest FOMC meeting showing that projections for economic growth have been revised down to 1.7 percent and core inflation projections are revised up.
“Some near-term measures of inflation expectations have recently moved up,” Powell said during the press briefing on Wednesday. “We see this in both market- and survey-based measures and survey respondents, both consumers and businesses, are mentioning tariffs as a driving factor. Beyond the next year or so, however, most pressures of longer-term expectations remain consistent with our 2 percent inflation goal.”
Following the January FOMC meeting where rates were also unchanged, it was widely expected that 2025 would see two to three rate cuts in the summer and fall. Now, with tariffs, deportations, layoffs and general uncertainty, observers are less sure. But the Fed noted it will make its decisions based on the available data.
READ ALSO: C-PACE Finds a Home in Multifamily
“The median participant projects that the appropriate level of the federal fund rate will be 3.9 percent at the end of this year and 3.4 percent at the end of next year,” Powell said during the briefing, noting that this was a challenging estimate to nail down, considering today’s elevated uncertainty.
Prior to the Fed’s announcement, the stock market was back on the rise and the ten-year Treasury yields also increased. According to the December Dot Plot, the median Fed official anticipated two rate cuts this year. As of March’s data, that number still seems to be on track.
