US Federal Reserve Holds Rates Steady Again At 4.25%-4.5%

The US Federal Reserve left interest rates unchanged at 4.25%-4.50% in its second policy meeting since Donald Trump returned to the presidency. It also announced it would slow the pace of decline in its balance sheet reductions starting in April.

This marks back-to-back meetings where the central bank has held rates steady after three consecutive cuts between September and December 2024.

Fed Chair Jerome Powell is scheduled to hold a press conference at 2:30 p.m. ET (March 20, 1 a.m. IST) in Washington.

Uncertainty around the economic outlook has increased, with the Federal Open Market Committee emphasising risks to both sides of its dual mandate of maximum employment and stable inflation, it said in the press release.

While economic activity has continued to expand at a solid pace and labour market conditions remain strong, inflation is still somewhat elevated. The Committee reiterated its commitment to returning inflation to its 2% objective and maintaining a restrictive policy stance for now.

The Committee reaffirmed that future policy decisions will be guided by incoming data and evolving economic conditions, with adjustments made as necessary to support its goals.

"The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals," the release said.

The Fed's updated dot plot, which the US central bank uses to convey its projections for the trajectory of interest rates, predicts a median federal funds rate of 3.88% at the end of 2025.

The monthly redemption cap on Treasury securities will be lowered from $25 billion to $5 billion, while the cap on agency debt and mortgage-backed securities will remain at $35 billion.

Fed Chair Jerome Powell and a majority of policymakers voted in favour of the decision, while Christopher Waller dissented, preferring to continue the current pace of balance sheet reductions.

Economists expect the Fed to begin easing in the second half of the year, with two reductions pencilled in for 2025, according to the central bank's December projections.

Powell, speaking to the House Financial Services Committee on February 12, noted that while inflation fell to 2.6% last year, it remains above the Fed's 2% target. Minutes from the FOMC's January 28-29 meeting showed officials wanted to see further disinflation before adjusting policy.

The Fed is also assessing economic risks, including uncertainty around Trump's trade policies. The administration has imposed or threatened new tariffs on major trading partners, adding to market volatility and concerns about slower growth amid lingering inflation.

Policymakers reiterated that future decisions would depend on incoming economic data, as they seek to balance inflation risks with economic stability.

Get live updates on the US Fed meeting here.