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Fed Holds Rates Steady Amid Economic Uncertainty

The Federal Reserve kept its benchmark interest rate unchanged at 4.5%, aligning with market expectations as it concluded its two-day policy meeting. While the decision was widely anticipated, the central bank adjusted its forward guidance, reflecting the ongoing uncertainty surrounding inflation and economic growth due to Trump’s tariff policies.

Fed projections revealed a divided outlook among officials: 11 out of 19 policymakers foresee two rate cuts this year, while only two expect a more aggressive three-cut approach. The cautious stance underscores concerns over the economic impact of trade tensions and fiscal policy shifts.

Inflation forecasts were revised upward, now expected to reach 2.7% in 2025, up from 2.5% in January, as tariff-related cost pressures continue to weigh on prices. Meanwhile, GDP growth estimates were downgraded to 1.7% from 2.1%, highlighting the challenging economic outlook ahead.

Fed officials reaffirmed their commitment to bringing inflation back to the 2% target, but uncertainty around Trump’s trade policies complicates their ability to navigate future rate adjustments. The central bank expects inflation to ease gradually by 2026-2027, but market participants remain skeptical about the timeline.

Looking ahead, investors will closely monitor incoming inflation data, labor market conditions, and potential shifts in trade policy, as these factors will be crucial in shaping the Fed’s next policy moves in the coming months.

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