The federal reserve kept its benchmark interest rate unchanged on Wednesday, for the next subsequent gathering, while also indicating that it still anticipates cutting costs half by the end of the year. Officials acknowledged, however, that the financial outlook is becoming more and more uncertain as prices shows signs of persistent boldness and weakening growth projections.
The Fed revised its aspirations for economic growth in its most recent quarterly economic forecast, predicting a slower pace of expansion than previously anticipated for this and subsequent year. The poverty rate is projected to rise by 4.4 % by the end of 2025, which the central bank also anticipates. The Fed’s target of 2 % inflation is expected to increase to 2.7 % this year from its current level of 2.5 %.
In its post-meeting speech, Fed noted that the confusion surrounding the economic outlook was growing, highlighting the exquisite harmony that politicians may reach. While a rise in inflation would usually require rate increases, a slowdown in growth and rising unemployment was require rate increases to support the economy.
Auswirkungen of tariffs and financial plans
The central banks is weighing the overall effects of the Trump administration’s monetary policies, particularly those involving taxes, as they decide to keep levels steady. According to economists, fresh trade barriers may temporarily increase inflation, while other procedures, such as deregulation, may offset some of those results by lowering costs.
Fed Chair Jerome Powell acknowledged that taxes have begun to affect prices, especially as prices for imported goods have increased.
During a press conference, Powell said,” I do believe that further progress [on lowering prices ] is likely delayed due to the arrival of tax inflation.”
adjusting bond investments to stabilize the industry
Fed announced a slowerdown in the rate at which it is reducing its assets of US Treasury stocks in addition to the level choice.
Prior to this, the central banks had the option of allowing the$ 25 billion in bonds to expire each month without making a reinvestment of the profits. It will now spend more forcefully, limiting the monthly discharge to simply$ 5 billion.
By stabilizing Treasury yields, which dropped significantly after the announcement, this action aims to lower long-term saving fees.
Customer attitude and prices
Problems are growing among academics and customers in spite of Fed’s efforts to control inflation. According to analysts at Goldman Sachs, inflation could increase to 3 % by the year’s end, from 2.6 % currently, largely driven by import taxes.
Client opinion also reflects growing prudence, with recent studies indicating that Americans anticipate inflation to increase. If these expectations persist, they may cause people to make purchases in a bid to avoid further rate increases. Due to the added stress of taxes, homebuilders and retailers have already indicated ability price increases for goods and services.
a slower rate of growth is anticipated.
Symptoms of economic downturn are also emerging, despite inflation still being a major concern. In the first half of 2025, the economy experienced slower growth, with Barclays cutting its GDP forecast to just 0.7 %, down from its earlier projection of 2.5 % in 2024.
The Fed’s course of action is questionable because inflation is still above target, growth is slowing, and tariffs are causing the financial landscape to become more difficult. Politicians have indicated price reductions are on the ocean, but how much and when will these cuts occur will depend on how the economy changes over the coming months.
