Federal Reserve Leaves Interest Rates Unchanged Amid Economic Uncertainty
The Federal Reserve announced on Wednesday that it will leave interest rates unchanged, citing uncertainty about inflation and economic conditions. The Fed’s decision comes after three consecutive interest rate cuts at its most recent meetings, including a 50-basis-point cut in September and two 25-basis-point reductions in November and December.
In a statement, the Federal Open Market Committee (FOMC) said that recent indicators suggest that economic activity has continued to expand at a solid pace, with the unemployment rate stabilizing at a low level and labor market conditions remaining solid. However, inflation remains somewhat elevated, and the FOMC said it is attentive to risks to both sides of its dual mandate of achieving maximum employment and inflation at 2% over the longer run.
FOMC members were unanimous in the decision to leave rates unchanged, and the committee said it will consider a range of information, including labor market data, inflation pressures and expectations, as well as financial and international developments, as it considers its next move.
Fed Chair Jerome Powell spoke at a press conference following the announcement, saying that the Fed’s stance is less restrictive than it was previously and that the economy remains strong. He noted that the Fed lowered interest rates by a full point over its three prior meetings and that the recalibration was appropriate in light of the progress on inflation and the rebalancing in the labor market.
Powell also addressed comments made by President Donald Trump, who has at times criticized the Fed and called for interest rates to be lowered. Powell said that he would not respond to Trump’s comments and that the Fed will continue to operate independently, focusing on using its tools to achieve its goals.
The Fed’s decision was widely anticipated, and financial markets reacted with a muted response, with the S&P 500 index down about 0.4% and the Dow Jones Industrial Average down about 0.2% during afternoon trading.
The probability of rates remaining at the current target range of 4.25% to 4.5% through the Fed’s March meeting rose from 68.5% on Tuesday to 79.6% following Wednesday’s announcement, according to the CME FedWatch tool. The Fed’s next meeting is scheduled for March 18 and 19.