Federal Reserve Maintains Interest Rates, Revises Growth Downward, Adjusts Inflation Higher

Fed Holds Rates Steady, Revises Growth and Inflation Outlook

The U.S. Federal Reserve maintained its benchmark federal funds rate at 4.25%-4.50% on Wednesday, marking the second consecutive pause following three rate cuts at the end of 2024. The central bank still projects the rate to end 2025 at 3.9%, suggesting two cuts before year-end.

The Fed’s latest economic projections revealed a downward revision in growth expectations, with GDP now expected to expand by just 1.7% in 2025, down from the 2.1% forecast in December. Growth estimates for 2026 and 2027 were also trimmed.

“Uncertainty around the economic outlook has increased,” the Fed noted in its statement, likely alluding to concerns surrounding President Trump’s proposed tariffs and their economic impact.

Meanwhile, core PCE inflation is now forecast to rise to 2.8% this year, up from the previous 2.5% projection. The inflation outlook for 2026 and 2027 remains unchanged at 2.2% and 2.0%, respectively.

The Fed’s “dot plot,” which reflects policymakers’ expectations for future rate moves, continues to show a federal funds rate of 3.9% by the end of 2025, consistent with December’s projection. The estimates for 2026 and 2027 remain at 3.4% and 3.1%, respectively.

Additionally, the central bank announced plans to slow the pace of its balance sheet reduction, known as quantitative tightening (QT). Starting April 1, the monthly runoff of Treasury securities will be reduced to $5 billion, down from the previous $25 billion.

Bitcoin (BTC) experienced initial volatility following the announcement but traded lower at press time, falling to $83,500 from just above $84,000 prior to the news.

U.S. equities continued to post solid gains, while the 10-year Treasury yield slipped two basis points to 4.28%. Gold, which has been a standout performer among asset classes, remained near record highs at $3,048 per ounce.

Risk assets have struggled in recent weeks amid concerns over Trump’s tariff policies and their potential impact on inflation and economic growth. Investor sentiment has also been weighed down by the Fed’s hawkish stance in its December and January meetings, dampening hopes for near-term monetary easing.

Fed Chair Jerome Powell is set to speak at 2:30 p.m. Eastern Time (18:30 UTC), with traders closely watching for insights into policymakers’ views on future monetary policy.