The Federal Reserve did exactly what Wall Street expected it to do on Wednesday: nothing. For the second meeting in a row—its second since President Trump began his second term—the central bank kept interest rates steady in a range of 4.25% to 4.5%, reports the New York Times. Officials lowered their forecasts for growth and raised them for inflation, but still forecast two quarter-point rate cuts this year. Analysts say the Fed, which raised interest rates to a 23-year-high to tackle inflation, then lowered them in its last three meetings last year, is in "wait-and-see" mode with Trump's economic policies, especially tariffs. Traders believe the next rate cut is likely to happen in June, CNN reports.
"Uncertainty around the economic outlook has increased," the Fed said in a statement, per the AP. Some of the central bank's policymakers predicted fewer than two rate cuts this year. "I think it may be one or zero cuts this year, particularly if the tariffs stick," Dan North, senior economist at Allianz Trade North America, told CNBC before Wednesday's Fed decision. "I don't think they're going to try and bail out the economy by cutting rates, because they know that if they stoke inflation, they're going to have to go back and start all over again."
The Wall Street Journal describes tariffs as an "economic shock" that can weaken economic growth and raise prices at the same time. "It puts the Fed between a rock and a hard place," Jay Bryson, chief economist at Wells Fargo, tells the Journal. "If inflation goes up, you want to be tightening. On the other hand, if the unemployment rate goes up, you want to be loosening." (More Federal Reserve stories.)
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