Friday, 18 July 2025
Jakarta
--:--
Tokyo
--:--
Hongkong
--:--
New York
--:--
Fed holds interest rates steady, still sees additional cuts coming
Thursday, 20 March 2025 01:07 WIB | MARKET UPDATE |Federal Reserve

The Federal Reserve in a closely watched decision Wednesday held the line on benchmark interest rates though still indicated that reductions are likely later in the year.

Faced with pressing concerns over the impact tariffs will have on a slowing economy, the rate-setting Federal Open Market Committee kept its key borrowing rate targeted in a range between 4.25%-4.5%, where it has been since December. Markets had been pricing in virtually zero chance of a move at this week's two-day policy meeting.

Along with the decision, officials updated their rate and economic projections for this year and through 2027 and altered the pace at which they are reducing bond holdings.

Despite the uncertain impact of President Donald Trump's tariffs as well as an ambitious fiscal policy of tax breaks and deregulation, officials said they still see another half percentage point of rate cuts through 2025. The Fed prefers to move in quarter percentage point increments, so that would mean two cuts this year.

In its post-meeting statement, the FOMC noted an elevated level of ambiguity surrounding the current climate.

"Uncertainty around the economic outlook has increased," the document stated. "The Committee is attentive to the risks to both sides of its dual mandate."

The Fed is charged with the twin-goals of maintaining full employment and low prices.

The committee downgraded its collective outlook for economic growth and gave a bump higher to its inflation projection. Officials now see the economy accelerating at just a 1.7% pace this year, down 0.4 percentage point from the last projection in December. On inflation, core prices are expected to grow at a 2.8% annual pace, up 0.3 percentage point from the previous estimate.

According to the "dot plot" of officials' rate expectations, the view is turning somewhat more hawkish on rates from December. At the previous meeting, just one participant saw no rate changes in 2025, compared to four now.

The grid showed rate expectations unchanged over December for future years, with the equivalent of two cuts expected in 2026 and one more in 2027 before the fed funds rate settles in at a longer-run level around 3%.

In addition to the rate decision, the Fed announced a further scaling back of its "quantitative tightening" program in which it is slowly reducing the bonds it holds on its balance sheet.

The central bank now will allow just $5 billion in maturing proceeds from Treasurys to roll off each month, down from $25 billion. However, it left a $35 billion cap on mortgage-backed securities unchanged, a level it has rarely hit since starting the process.

Fed Governor Christopher Waller was the lone dissenting vote for the Fed's move. However, the statement noted that Waller favored holding rates steady but wanted to see the QT program go on as before.

The Fed's actions follow a hectic beginning to President Donald Trump's second term in office. The Republican has rattled financial markets with tariffs implemented thus far on steel, aluminum and an assortment of other goods against U.S. global trading partners.

In addition, the administration is threatening another round of even more aggressive duties following a review that is scheduled for release April 2.

An uncertain air over what is to come has dimmed the confidence of consumers, who in recent surveys have jacked up inflation expectations because of the tariffs. Retail spending increased in February, albeit less than expected though underlying indicators showed that consumers are still weathering the stormy political climate.

Stocks have been fragile since Trump assumed office, with major averages dipping in and out of correction territory as administration officials cautioned about an economic reset away from government-fueled stimulus and towards a more private sector-oriented approach.

Bank of America CEO Brian Moynihan earlier Wednesday countered much of the gloomy talk recently around Wall Street. The head of the second-largest U.S. bank by assets said card data shows spending is continuing at a solid pace, with BofA's economists expecting the economy to grow around 2% this year.

However, some cracks have been showing in the labor market.

Nonfarm payrolls grew at a slower than expected pace in February and a broad measure of unemployment that includes discouraged and underemployed workers jumped a half percentage point during the month to its highest level since October 2021.

Source: CNBC

RELATED NEWS
Australian stocks hit record high as Asia-Pacific markets track Wall Street gains ...
Friday, 18 July 2025 08:03 WIB

Australian equities notched a record high as Asia-Pacific markets tracked Wall Street gains on the back of strong U.S. economic data reports and a slew of better-than-expected corporate earnings. Aus...

S&P 500, Nasdaq 100 Climb to New Highs...
Friday, 18 July 2025 01:29 WIB

US stocks advanced on Thursday, supported by upbeat earnings and solid economic data as markets brushed aside lingering concerns over President Trump's criticism of the Fed and renewed tariff threats....

Wall Street Moves Slowly, Retail Strong, Trump Eases Tensions...
Thursday, 17 July 2025 21:27 WIB

S&P 500 and Nasdaq 100 futures edged up 0.1% and 0.2%, respectively, on Thursday morning (July 17), while the Dow Jones Industrial Average remained flat. What caused this? Investors were digesting...

European Stocks Rebound, Earnings in Focus ...
Thursday, 17 July 2025 14:53 WIB

The STOXX 50 rose 0.9% and the STOXX 600 gained 0.6% on Thursday, marking their first advances in six and five consecutive sessions, respectively, as investor attention shifted to corporate earnings. ...

Asia-Pacific markets mostly fall as investors assess Japan's trade data and Trump's plans for Powell ...
Thursday, 17 July 2025 07:46 WIB

Asia-Pacific markets mostly fell Thursday, with investors assessing the fall in Japan's exports for the second consecutive month, as well as U.S. President Donald Trump's denial of his intent to fire ...

LATEST NEWS
Oil Climbs Again as Traders Weigh Signals of Near-Term Tightness

Oil headed for a back-to-back daily gain after US data showed the world's largest economy holding up despite the fallout from the Washington-led trade war, while market metrics pointed to near-term tightness. Global benchmark Brent rose toward $70...

Silver Price Forecast: XAG/USD struggles near $38.00 due to diminished odds of Fed cuts

Silver price (XAG/USD) holds mild losses after two days of gains, trading around $38.20 per troy ounce during the Asian hours on Friday. The non-interest-bearing Silver attracts some sellers as the upbeat economic data from the United States (US)...

EUR/USD surges above 1.1600 due to easing risk aversion following dovish Fedspeak

EUR/USD recovers its recent losses registered in the previous day, trading around 1.1630 during the Asian hours on Friday. The pair appreciates as the US Dollar (USD) loses ground amid easing risk sentiment following the dovish remarks from Federal...

POPULAR NEWS
US consumer prices rise in June as tariff pass-through begins
Wednesday, 16 July 2025 01:35 WIB

U.S. consumer prices increased by the most in five months in June amid higher costs for some goods, suggesting tariffs were starting to have an...

European stocks erased early gains
Wednesday, 16 July 2025 01:49 WIB

European stocks erased early gains and closed mostly lower on Tuesday as markets continued to assess how potential tariffs from the US may hurt...

Fed's Logan says her base case calls for holding rates steady a while longer
Wednesday, 16 July 2025 07:43 WIB

The U.S. central bank will probably need to leave interest rates where they are for a while longer to ensure inflation stays low in the face of...

Investors seek protection from risk of Fed chief's ouster
Tuesday, 15 July 2025 23:28 WIB

President Donald Trump's renewed calls for Federal Reserve Chair Jerome Powell's resignation have prompted investors to protect portfolios against...