The Federal Open Market Committee (FOMC) voted on Wednesday to keep the benchmark interest rate unchanged at between 4.25% and 4.5%, as widely anticipated. However, the committee revised its economic outlook, projecting slower growth due to the impact of tariffs while forecasting higher inflation. Fed officials expect inflation (PCE) to be at 2.8% by the end of this year, up from a projection of 2.5% in December. US economic growth has been revised down to 1.7% from 2.1%.
Despite a downgrade in the economic outlook, the Fed’s dot plot, a chart to illustrate expectations of the interest rates for the next three years from policymakers, projects two quarter-percentage-point rate cuts this year, remaining the same as in December. The Federal Reserve also announced plans to slow the pace of its balance sheet runoff from April.
