Fed Holds Interest Rates Steady, but Trump’s Tariffs Could Slow Inflation Progress

By
Millicent Wong
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Fed Holds Interest Rates Steady, but Trump’s Tariffs Could Slow Inflation Progress

The Federal Reserve left the interest rates on Wednesday for a second meeting in a row. The previous recognition of the central bank has been to this day that President Trump's guidelines have real effects on the economy and had significant uncertainties about where inflation, growth and ultimately – interest rates are led. Here are the snack:

  • The tariffs were the focus during the press conference with Jerome H. Powell. The FED chair went so far that tariffs probably lead to “further progress is delayed” if inflation has declined to the 2 percent goal of the central bank. This recognition demonstrated in the higher inflation forecasts who put civil servants in new business forecasts. Until the end of the year, the officials estimate that the core inflation that extends the volatile food and energy prices will hold in 2.8 percent before falling back to 2.2 percent in 2027.

  • Fed civil servants combined their higher inflation forecast with lower estimates for economic growth, even if they stated in previous forecasts that they could reduce interest rates by half a point this year and deliver two quarter -point cuts. However, the area of ​​the possible results was far, although eight political decision -makers either forecast no additional cuts or only one. Only two believed that the FED would reduce interest rates by 0.75 percentage points or three cuts of a quarter of the point this year.

  • In the past few months, Mr. Powell has been convinced that the Fed is well positioned to react to strong changes in the trajectory for the economy, and could afford to be patient in view of the solid basis of the labor market. He affirmed this point and pushed back the pillars of consumer expectations about inflation and economy that have occurred in the recent survey data.

  • While the way for the interest rates and the economy was the focus of March meeting, the decision of the Fed solved the pace with which it reduces its balance sheet. Mr. Powell said the idea was to reduce the possibility of market trucks in the financing markets.