US Federal Reserve keeps benchmark rate unchanged in 4.25-4.5% range; projects US GDP growth slowdown

US federal reserve In its meeting today, the benchmark rate was kept unchanged in the 4.25-4.5% range. “In support of its goals, the committee decided to maintain the target limit for Federal Funds Rate at 4-1/4-1/2 percent. Considering the limit of additional adjustment for the target limit for the rate of federal funds, the committee will assess carefully upcoming data, developed outlooks and the balance of risks,” the statement said.
“Recent indicators suggest that economic activity has continued to expand at a solid speed. The unemployment rate has stabilized at low levels in recent months, and the labor market situation remains solid. Inflation remains somewhat high. The committee wants to get maximum employment and get inflation at a rate of 2 percent.
Federal Reserve officials maintained their projection of two interest rate decrease in 2025, while 2025 modified their development estimates downwards and increased their inflation predictions.
The US Central Bank officials suggested that they expect a decrease in lending of 50 basis points before the end of the year, given the anticipated economic recession and the final fall in inflation rates.
Fed’s approach to inflation saw an upward amendment, compared to the pre -predicted 2.5% in December, with their favorite price increase measurement to reach 2.7% by the end of the year. The Federal Reserve targets inflation of 2%.
Additionally, they reduced US GDP Growth Forecast from 2.1% to 1.7% for the current year, with predictions of a minor high unemployment rate by the end of this year.
“In assessing the appropriate attitude of monetary policy, the committee will continue to monitor the implication of the information coming for the economic approach. The committee will be prepared to properly adjust the monetary policy attitude. If the risk emerges can disrupt the achievement of the committee’s goals.
Most market analysts expected that the Federal Reserve would maintain its current interest rate by monitoring economic development. The job market appears stable after a strong economic performance at the end of last year.
US President Donald Trump has considerable ambiguity about the economic impact of policies. Their declared objectives include reviving domestic manufacturing and reducing the federal workforce.
Regarding tariffs and other measures, a continuous stream of policy announcements from Trump has created significant economic uncertainty. Economists are worried that it may motivate American businesses and consumers to reduce their expenses.
Whether the economic condition should be bad, the Federal Reserve maintains the option to encourage development through a decrease in interest rate, as is displayed in the previous economic recession. Currently with a primary interest rate between 4.25% and 4.50%, there is enough scope for adjustment.
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However, as stated in an associated press report, the US Federal Reserve faces a more complex landscape in its current decision making process. The economy will be stimulated when reducing interest rates, it can simultaneously higher inflation, especially given the pressure related to existing tariffs.
The Fed lacks the effective mechanism to address “stagflation”, which is a special status of economic stagnation in association with continuous high inflation, notes.
The interest rate cut, the first Fed’s 2% target was seen as positive reactions to inflation, it can now be considered negatively. These deductions may be necessary to combat economic challenges arising out of wide tariffs, adequate decrease in government expenditure, and economic uncertainty.
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Meanwhile, the US GDP development estimates have significant downward amendments, its growth forecast with barclays has been adjusted up to 0.7%, significantly reduced by 2.5% in 2024. Goldman Sachs Analysts stated that the current will increase from 2.6% to 3%, which excludes food and energy prices.