The Federal Reserve (Fed), the U.S. central bank, emphasized economic uncertainty on the 19th as it decided to keep interest rates unchanged.

Following a two-day Federal Open Market Committee (FOMC) meeting, the Fed announced on the 19th that it would maintain the benchmark interest rate at 4.25% to 4.50%.

This marks the second consecutive rate freeze this year. The Fed had previously held rates steady at its first meeting of the year on January 29—the first under the second Trump administration. The decision to freeze rates this time is seen as a response to a slowing trend in inflation relief, combined with heightened economic uncertainty due to President Trump’s “tariff war.”

In its quarterly Summary of Economic Projections (SEP), the Fed forecasted a year-end benchmark rate (median) of 3.9%, implying two 0.25% rate cuts by year-end—a projection unchanged from December last year. This raises the likelihood of a rate cut at the May FOMC meeting.

Alongside this, the Fed downgraded its 2025 GDP growth forecast (median) by 0.4 percentage points, from 2.1% in December to 1.7%.

The year-end Personal Consumption Expenditures (PCE) inflation rate projection was raised to 2.7% (from 2.5%), and the core PCE inflation rate (excluding volatile food and energy items) was lifted to 2.8% (from 2.5%). The year-end unemployment rate forecast was slightly increased from 4.3% to 4.4%.

In a statement detailing the meeting’s outcomes, including the rate freeze, the FOMC noted, “Recent indicators suggest that economic activity continues to expand at a solid pace.” It added, “The unemployment rate has stabilized at a low level in recent months, labor market conditions remain robust, and inflation has risen somewhat.” The committee reiterated its commitment to achieving maximum employment and 2% inflation over the long term, while acknowledging that “uncertainty surrounding the economic outlook has increased.”

However, Fed Chair Jerome Powell suggested that inflation spurred by Trump’s sweeping tariff policies might be temporary. At the press conference, Powell stated, “If inflation is a temporary phenomenon that we expect to dissipate quickly without our intervention, it may sometimes be appropriate to overlook it.” He continued, “This depends on whether tariff-induced inflation passes quickly and is heavily influenced by whether long-term inflation expectations remain well-anchored.”

Powell also stressed that the U.S. is not currently at risk of a recession or stagflation (high inflation coupled with economic stagnation). Responding to Wall Street analyses suggesting rising recession odds, he said, “Multiple economic forecasters have slightly raised recession probabilities, but they remain relatively modest. While the odds have increased, they are not high.”

As expected, with the Fed maintaining rates and sticking to its year-end cut projections, all three major New York stock indices rose. The Dow Jones Industrial Average climbed 383.32 points (+0.92%) to close at 41,9164.63. The S&P 500 gained 60.63 points (+1.08%) to end at 5,675.29, while the Nasdaq rose 246.67 points (+1.41%) to finish at 17,750.79.

Russell Price, Chief Economist at Ameriprise Financial, explained the market’s rally: “Inflation expectations ticked up slightly, and GDP forecasts dipped a bit. The market was looking for anything to reduce uncertainty and didn’t interpret the Fed’s decision as adding to it.”

<Hongyong Park>