Fed leaves policy rate outlook unchanged amid projected growth slowdown, temporary inflation jump

Federal Reserve held interest rates steady on Wednesday, as expected, but U.S. central bank policymakers indicated they still anticipate reducing borrowing costs by half a percentage point by the end of this year in the context of slowing economic growth and, eventually, a downturn in inflation.

Taking stock of the Trump administration's rollout of tariffs, Fed officials actually marked up their outlook for inflation this year, with their preferred measure of price increases expected to end the year at 2.7% versus the 2.5% pace anticipated in December. The Fed targets inflation at 2%.

But they also marked down the outlook for economic growth for this year from 2.1% to 1.7%, with slightly higher unemployment by the end of thIS year.

Policymakers said risks had increased, with a near unanimous sentiment in saying the outlook for the year was muddled.

«Uncertainty around the outlook has increased,» the Fed said in a new policy statement that accounts for the first weeks of the new Trump administration and the initial rollout of what White House officials say will ultimately be global tariffs on imported goods. The Fed left its policy rate in the 4.25%-4.50% range.

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The Fed also said it will slow the ongoing drawdown of its balance sheet, known as quantitative tightening.

Fed Governor Chris Waller dissented from the policy statement because of the change in balance sheet policy.

LOWER GROWTH, HIGHER UNEMPLOYMENT
The rate projections matched the expectations set by financial markets ahead of the