The Fed pencils in 2 rate cuts. Anything could happen.
Subscribe to enjoy similar stories. Fed officials essentially project stagflation this year, with both lower growth and higher inflation. Federal Reserve officials didn’t alter interest rates this week, and investors shouldn’t get too comfortable with their projections for two rate cuts later this year.
That is because the economic outlook remains highly uncertain, a point Fed Chair Jerome Powell made repeatedly at a press conference Wednesday following the March 18-19 Federal Open Market Committee Meeting. FOMC members voted unanimously on Wednesday to hold the target range for the federal-funds rate at 4.25% to 4.5%, and once again penciled in a median forecast for two rate cuts in 2025, as they did in December. But significant changes, announced and expected, in federal policies on trade, immigration, and fiscal spending mean rate expectations could change later this year.
In other words, the Fed may cut twice, or more or less, or not at all. “It’s really hard to know how this is going to work out," Fed Chair Jerome Powell said Wednesday. “I don’t know anyone who has a lot of confidence in their forecast." Committee members’ projections for the federal-funds rate are based on individuals’ expectations.
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