Fed Holds Rates Steady, Adjusts Growth and Inflation Projections
The U.S. Federal Reserve kept its benchmark interest rate unchanged at 4.25%-4.50% on Wednesday, marking a second consecutive pause following three rate cuts at the end of 2024. Officials still anticipate the fed funds rate to close out 2025 at 3.9%, implying two rate cuts before year-end.
Alongside its rate decision, the Fed released updated economic projections, revealing a downward revision in growth expectations. The U.S. economy is now forecast to expand by 1.7% in 2025, down from the 2.1% estimate issued in December. Growth forecasts for 2026 and 2027 were also slightly lowered.
“Uncertainty around the economic outlook has increased,” the Fed noted in its statement, a likely reference to the ongoing trade policy shifts under President Trump and their potential economic implications.
Meanwhile, inflation expectations have ticked higher, with core PCE inflation now projected to reach 2.8% in 2025, up from the 2.5% forecast in December. Projections for 2026 and 2027 remain steady at 2.2% and 2.0%, respectively.
The Fed’s “dot plot” continues to suggest that interest rates will end 2025 at 3.9%, unchanged from December’s forecast. The longer-term rate outlook remains at 3.4% for 2026 and 3.1% for 2027.
In a separate move, the Fed announced that it will begin slowing the pace of its balance sheet reduction, or quantitative tightening (QT). Starting April 1, the monthly runoff of Treasury securities will be reduced from $25 billion to $5 billion.
Bitcoin (BTC) initially showed volatility following the announcement but ultimately declined, trading at $83,500 at press time, down from just over $84,000 before the news.
U.S. equities remained in positive territory, while the 10-year Treasury yield slipped two basis points to 4.28%. Gold, which has been a strong performer in recent weeks, continued to hover near record highs at $3,048 per ounce.
Investor sentiment has been weighed down in recent weeks by concerns over Trump’s proposed tariffs and their potential impact on inflation and economic growth. The Fed’s previously hawkish stance in December and January also dampened hopes for looser financial conditions, pressuring both stocks and cryptocurrencies.
Fed Chair Jerome Powell is scheduled to hold a press conference at 2:30 p.m. Eastern Time (18:30 UTC), with market participants closely monitoring his remarks for further policy signals.
