Fed Leaves Interest Rates Unchanged, Still Sees Rate Cuts This Year

(RTTNews) - In an almost universally expected move, the Federal Reserve on Wednesday announced its decision to once again leave interest rates unchanged, but projections signaled the central bank is still likely to lower rates later this year.

The Fed said it decided to maintain the target range for the federal funds rate at 4.25 to 4.50 percent in support of its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run.

At the Fed's last meeting in late January, the central bank also left rates unchanged after it lowered rates by a total of 100 basis points or 1.0 percentage point over the three previous meetings.

The accompanying statement noted "uncertainty around the economic outlook has increased," and the Fed said it is "attentive to the risks to both sides of its dual mandate."

With regard to the outlook for rates, Fed officials still forecast rates in a range of 3.75 to 4.0 percent by the end of the year.

The forecast was unchanged from last December and suggests the Fed is likely to cut rates by a quarter point two times later this year.

Meanwhile, Fed officials lowered their projections for GDP growth in 2025 to 1.7 percent from 2.1 percent and raised their forecasts for consumer price growth this year to 2.7 percent from 2.5 percent.

The central bank also announced it has decided to slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion beginning in April.

The Fed said it will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion.

While the decision to leave interest rates unchanged was unanimous, Fed Board Governor Christopher Waller preferred to continue the current pace of decline in securities holdings.

The Fed's next monetary policy meeting is scheduled for May 7th, with CME Group's FedWatch Tool currently indicating a 79.9 percent chance the central bank will once again leave rates unchanged.

However, the FedWatch Tool suggests there is a better chance the Fed will lower rates at its June or July meetings.