The Federal Reserve on Wednesday announced that it will leave its benchmark interest rate unchanged as policymakers continue to assess uncertainty around inflation and economic conditions in light of federal policy shifts.
The central bank’s decision leaves the benchmark federal funds rate at a range of 4.25% to 4.5%.
The move comes after the Fed left rates at that level at its previous meeting in January, which came on the heels of three consecutive rate cuts at its preceding meetings – which involved a 50-basis-point cut in September and a pair of 25-basis-point reductions in November and December.
The Federal Open Market Committee (FOMC), which guides the central bank’s monetary policy moves, noted in its announcement that, “Uncertainty around the economic outlook has increased” and added it’s focused on risks to both sides of its dual mandate to promote maximum employment and keep inflation at 2% over the long-run.
In addition to announcing its decision on interest rates, the FOMC released a summary of economic projections that showed central bank policymakers are forecasting two 25-basis-point interest rate cuts this year, followed by two cuts of that size in 2026 and one in 2027.
Policymakers projected slower economic growth and higher unemployment in 2025 than in their last projections released in December.
They see real gross domestic product (GDP) growing 1.7% as of the end of 2025, down from a 2.1% estimate, while the unemployment rate was projected to be 4.4% in December – up from 4.3% in the last projections. The unemployment rate was 4.1% in February.
The Fed’s economic projections also show the personal consumption expenditures (PCE) index, policymakers’ preferred inflation gauge, at 2.7% at the end of this year – higher than the 2.5% estimate released at the end of last year. That’s slightly above the 2.5% PCE reading the Commerce Department reported for February.
Fed Chair Jerome Powell noted in his opening remarks at a press conference that, “Some near-term measures of inflation expectations have recently moved up. We see this in both market- and survey-based measures. And survey respondents, both consumers and businesses, are mentioning tariffs as a driving factor.”
He also said that the “labor market is not a source of significant inflationary pressures,” and noted that “inflation has eased significantly over the past two years, but remains somewhat elevated relative to our 2% longer-run goal.”
Powell was asked about how much of the higher inflation forecast is due at least in part to tariffs.
“You may have seen that goods inflation moved up pretty significantly in the first two months of the year. Trying to track that back to actual tariff increases, given what was tariffed and what was not – very, very challenging,” Powell explained. “So some of it – the answer is clearly some of it, a good part of it, is coming from tariffs. But we will be working, and so will other forecasters, to try to find the best possible way to separate non-tariff inflation from tariff inflation.”
This is a developing story. Please check back for updates.
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