The US Federal Reserve is in no “hurry” to adjust interest rates again, the central bank’s chair Jerome Powell said Wednesday, after policymakers voted to pause rate cuts in the first decision since Donald Trump’s White House return.

The Fed’s rate-setting committee voted unanimously to keep the bank’s benchmark lending rate at between 4.25 percent and 4.50 percent, the Fed announced in a statement.

“With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell told reporters after the decision.

The Fed’s pause follows three consecutive rate reductions which together lowered its key rate by a full percentage point.

In its statement, the Fed said the unemployment rate had stabilized “at a low level,” and the labor market was still solid.

Inflation however “remains somewhat elevated,” the Fed said, removing a reference in earlier statements to inflation making progress towards its long-term target of two percent.

“By design, Powell provided little in the way of new information at this FOMC meeting,” economists at Citi wrote in a note to clients Wednesday, referring to the Fed’s rate-setting committee.

Powell, they added, had “effectively” kept all options for the Fed’s next rate decision in March.

Trump slams Powell, Fed

The US central bank has a dual mandate from Congress to act independently to tackle inflation and unemployment.

It does so primarily by raising or lowering its key short-term lending rate, which influences borrowing costs for consumers and businesses.

Most analysts agree that the US economy is going fairly well, with robust growth, a largely healthy labor market, and relatively low inflation which nevertheless remains stuck above the Fed’s target.

But in a post to his Truth Social account, President Trump slammed both Powell and the Fed, accusing them of failing “to stop the problem they created with Inflation.”

Futures traders see a probability of more than 80 percent that the Fed will extend its pause to rate cuts at its March meeting, according to data from CME Group.

‘Wait and see’

Since returning to office on January 20, Trump has revived his threats to impose sweeping tariffs on US trading partners as soon as this weekend and to deport millions of undocumented workers.

He has also said he wants to extend expiring tax cuts and slash red tape on energy production.

Most — though not all — economists expect Trump’s tariff and immigration policies to be at least mildly inflationary, raising the cost of goods faced by consumers.

“I think those policies are definitively inflationary, it’s just a question of what degree,” Mark Zandi from Moody’s Analytics told AFP ahead of the rate decision.

Asked about the likely impact of Trump’s proposals, including tariffs, Powell said the Fed would have to “wait and see” how they affected the economy.

At the Fed’s previous meeting, policymakers dialed back the number of rate cuts they expect this year to a median of just two, with some incorporating assumptions about Trump’s likely economic policies into their forecasts, according to minutes of the meeting.

Given the uncertainty about the effect of Trump’s policies on the US economy, analysts are now divided over how many rate cuts they expect the Fed to make in 2025.

“We retain our baseline that the FOMC will cut rates 25bp (basis points) this year, in June,” economists at Barclays wrote, pointing to the economy’s underlying strength.

Zandi from Moody’s Analytics said he also expects two rate cuts later in the year.

But, he added, “there are meaningful odds that the next move by the Fed may not be a rate cut, it might be a rate increase.”

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

The US Federal Reserve voted Wednesday to keep interest rates at a 23-year high for a fifth consecutive meeting, while signaling it still expects to make three cuts this year.

The news sent US markets higher, as traders cheered the central bank’s affirmation that three cuts are likely despite a recent uptick in monthly inflation.

All three major indices on Wall Street closed at new records.

The Fed’s unanimous decision to hold its key lending rate between 5.25 percent and 5.50 percent lets policymakers “carefully assess incoming data, the evolving outlook and the balance of risks,” it said in a statement.

Last year, the Fed’s policies proved to be a success: inflation eased dramatically from the multi-decade highs seen in 2022 toward its long-term two percent target, while the United States was able to avoid a widely predicted recession thanks to unexpectedly strong economic growth.

But 2024 has been more challenging, with the first two months of data pointing to a small rise in the pace of monthly inflation — renewing fears that interest rates will have to remain high for longer to bring prices under control.

“Inflation is still too high,” Powell told reporters after the rate decision was published, adding: “ongoing progress in bringing it down is not assured, and the path forward is uncertain.”

But despite the recent rise, Powell said this year’s inflation data “haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward two percent.”

Growth forecast lifted

Alongside its rate decision, Fed policymakers also updated their economic forecasts on Wednesday, sharply upgrading the US growth outlook for this year to 2.1 percent, from 1.4 percent in December.

Fed officials left the headline inflation forecast unchanged, but slightly raised the outlook for annual so-called “core” inflation — which excludes energy and food prices — to 2.6 percent.

The members of the rate-setting Federal Open Market Committee (FOMC) also left the median projection for interest rates at end-2024 at the midpoint between 4.50 and 4.75.

This means they still expect 0.75 percentage points of cuts before the end of the year, which would likely translate into three 0.25 percentage point cuts.

In the run-up to Wednesday’s decision, some analysts had predicted that the inflationary picture could lead the FOMC to reduce the number of cuts they expect to see this year from three to two — something that ultimately did not materialize.

“The Fed delivered a straightforwardly dovish message: rate cuts are coming even if inflation or growth run stronger than expected,” economists at Citi wrote in a note to clients after Powell’s press conference had concluded.

Change of tune

Futures traders currently assign a probability of more than 70 percent that the Fed will start cutting interest rates by mid-June, with that number rising to more than 85 percent by the end of July, according to data from CME Group.

“We continue to expect the first cut from the Fed in June,” the Citi economists wrote, forecasting as many as five cuts this year on the assumption that the hot US labor market weakens in the months ahead.

Others expect a less aggressive pace of cuts, with economists at Wells Fargo predicting a total of four this year, with the first in June.

“However, with the committee more upbeat on prospects for economic activity and a bit more worried about inflation, the risks to our outlook are skewed toward the FOMC beginning to ease a little later in the summer (at its July 31 meeting), or potentially proceeding at a slower pace,” they wrote in a note to clients.

Powell also said Wednesday that the Fed expects “fairly soon” to start slowing down the pace at which it is selling off assets it acquired to help the economy weather the Covid-19 pandemic.

Such a move would reduce the chances of another liquidity crisis, and could actually allow the Fed to do more over the longer term to reduce its swollen balance sheet, Powell said.

“It’s sort of ironic that by going slower, you can get farther,” Powell said. “But that’s the idea.”

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)