The Fed holds interest rates steady but cuts economic growth forecasts because of tariffs

• The Federal Reserve said Wednesday it is keeping interest rates at current levels, but warned of uncertainty in the US economy.

• Fed policymakers said they expect the economy to be weaker this year than previously thought. They also forecast inflation to be higher this year.

• The announcement comes as President Donald Trump wages a chaotic trade war, guts government funding and axes thousands of federal workers.

• That aggressive agenda has caused many businesses and consumers to pause as they assess the impact.

Our live coverage of the Federal Reserve rate decision has ended. Read more here.

National Economic Council Director Kevin Hassett told CNN’s Kaitlan Collins Wednesday that President Donald Trump respects the Federal Reserve’s independence, just hours after two Democratic FTC commissioners said they were “illegally fired” by the Trump administration Tuesday.

“We very much respect the independence of the Fed, and there’s a mass of literature that independent central banks perform better for economies,” Hassett told Kaitlan. “I think that’s been resolved in the previous administration, you could go back and find a clip where I talked about it right in this space.”

During a gaggle at the White House in 2018, then-Council of Economic Advisers chair Hassett told reporters that Fed Chair Jerome Powell’s job was “100% safe.”

“100%? The Fed Chairman’s job is not in jeopardy by this president?” a reporter asked.

“Absolutely. That’s correct. Yes,” Hassett replied.

On Wednesday, Hassett also pushed back against projections from Fed officials revising the nation’s annual GDP, which went from a projected 2.1% growth rate in December to 1.7%.

“Oh, I have an old-fashioned back-of-the-envelope model that I was taught by Alan Greenspan how to use when I was a 29-year-old economist at the Fed, and I just ran the numbers a couple days ago at the old Greenspan model was north of two,” Hassett said. “I said 2.5% a week ago, and I actually got that out of a model that was one of Alan Greenspan’s favorite real-time models.”

“Regrets, I’ve had a few,” Federal Reserve Chair Jerome Powell, told a reporter in May 2023. Chief among those regrets was likely referring to pandemic-era inflation, which hit a four-decade high in 2022, as “transitory.”

For much of 2021, as inflation was beginning to heat up, Powell told reporters he wasn’t concerned. Rather, he felt it was a reflection of factors like supply chain bottlenecks and shortages of goods due to the impact of the pandemic. As those issues resolved, inflation would abate, hence, transitory.

Spoiler alert: It didn’t. Once the Fed finally recognized inflation was more persistent, it had to act aggressively to raise interest rates. The central bank got an earful from Republicans.

But, ironically, on Wednesday as Powell resurfaced the now-infamous term saying that, “the last time there were tariffs… the inflation was transitory,” Trump’s National Economic Council Director Kevin Hassett and his former NEC Director Larry Kudlow were overjoyed.

“Powell was clear that if there were a tariff (inflation) effect, it’s a transitory one,” Hassett told reporters at the White House on Wednesday.

Before interviewing Hassett earlier, Kudlow, now a Fox Business News host, said, “The most overrated theme on Wall Street today is that Trump tariffs are going to be inflationary. They will not… any price hikes will be transitory.”

Volatility has rocked US markets this month, but investors on Wednesday received a welcome boost as the Federal Reserve signaled confidence in short-term stability and refrained from jolting markets with a surprise policy decision.

US stocks closed higher Wednesday as the Fed held its benchmark interest rate steady, matching expectations. US markets have been choppy this month and stocks rallied on a sense of short-term calm.

The Dow gained 383 points, or 0.92%. The broader S&P 500 gained 1.08% and the tech-heavy Nasdaq Composite rose 1.41%.

The S&P 500 posted its best gain on a Fed rate decision day since July, according to FactSet data.

Wall Street’s fear gauge, the Cboe Volatility Index, or VIX, fell almost 10% at one point on Wednesday to its lowest level since March 3, signaling a moment of relative ease.

Wall Street opened higher Wednesday morning and remained firmly in the green, surging higher after Fed Chair Jerome Powell’s remarks this afternoon signaled confidence in the economy despite uncertainty.

The S&P 500 has been trying to claw back gains after it closed in correction territory last week, down 10.1% from its record high on February 19.

Stocks rallied after closing in the red Tuesday, resuming a brief rally that began on Friday and continued into Monday. The benchmark index on Wednesday closed down 7.6% from its record high.

The yield on the 10-year Treasury fell to 4.248%.

However, the Fed in its economic projections signaled higher expectations for inflation and slower expectations for growth this year, raising questions about future policy action.

“While the outcome of this meeting was broadly in line with market participant expectations, it clearly shows the conundrum the Fed has in balancing growth and inflation expectations,” said Charlie Ripley, senior investment strategist as Allianz Investment Management.

A lot happened and, perhaps equally important, a lot didn’t happen at the Federal Reserve’s monetary policy meeting this month and subsequent press conference with Fed Chair Jerome Powell held on Wednesday.

The TL;DR (too long; didn’t read) is as follows, in no particular order:

Americans’ financial fragility is increasing, and they’re growing more pessimistic about getting approved for a mortgage, a car loan or a credit card, according to new survey data released Monday by the Federal Reserve Bank of New York.

The New York Fed’s Credit Access Survey, which is released every four months, showed that Americans became sharply more downtrodden in February about expected credit conditions as well as their own financial health.

The average likelihood of being able to come up with $2,000 if an unexpected need arose in the next month dropped to 62.7%, a record low for the survey series that was started in 2013. The share of discouraged borrowers — defined as those who did not apply for any credit because they thought they would get rejected — jumped to a new series high of 8.5% (from 6.6% in October).

Rejection rates for mortgage refinances also hit a record high for the survey series, rocketing to 41.8% from 22% in October.

While February’s report didn’t show many drastic shifts in respondents’ current credit-related experiences — the soaring refinancing rejections excluded — expectations for a new credit card, home loan or auto loan being rejected all shot higher, according to the report.

The Federal Reserve on Wednesday decided yet again to stand pat on interest rates. Despite the Fed’s inaction, there are still opportunities to maximize the interest you earn on your savings or reduce what you pay on your debts.

Even though interest rates have been coming down slowly in recent months, you can still get inflation-beating returns for your cash savings, in very easy, low-risk ways.

And even if the Fed cuts rates later this year, as many expect, how much of a difference that will make depends on the type of debt you have and the amount you owe.

Read more here.

US stocks were higher Wednesday after the Federal Reserve’s announcement it would hold rates steady.

US stocks are coming off a recent market rout, and the rate decision matching expectations provided tailwinds for a rally that had picked up steam this morning, driven higher by rebounding tech stocks.

Wall Street had expected the Fed to “stay on the sidelines” and hold rates steady, according to Charlie Ripley, senior investment strategist at Allianz Investment Management.

Stocks also rallied on the lack of surprises as the Fed’s “dot plot” showed expectations for two rate cuts this year, similar to the last projection in December.

David Russell, global head of market strategy at TradeStation, said the Fed is in “wait and see mode,” and the catalyst for markets has been more focused on recent economic data and tariff headlines. There has been a lack of recent tariff announcements which has buoyed the market.

Wall Street’s fear gauge, the Cboe Volatility Index, or VIX, fell almost 10% on Wednesday to its lowest level since March 3, signaling a moment of relative ease.

The VIX traded below the 20-point level for the first since March 3. Trading above 20 signals heightened volatility while trading below 20 signals stability.

Investors took much solace in hearing Federal Reserve Chair Jerome Powell say the economy is on solid footing despite a slew of recent economic surveys sparking concerns of the opposite.

But that “soft” data isn’t necessarily indicative of economic weakness, Powell said Wednesday. “That probably has to do with turmoil at the beginning of the administration.”

The “hard” data — which shows low unemployment, healthy levels of job creation, slowing but still-solid consumer spending — suggests the US economy is “healthy,” Powell said.

Soft data tends to refer to surveys, which are often seen as more subjective gauges of economic activity. While hard data, i.e., economic reports, are seen as more definitive, objective gauges.

“The relationship between the survey data and economic activity hasn’t been very tight,” he said. “There are times people are saying very downbeat things about the economy and then going out and buying a new car.”

“But,” Powell cautioned, “we don’t know that will be the case here. We will be watching very carefully for signs of weakness in the real data.”

For quite some time, after the Fed stopped hiking rates and started easing up a bit, it had said: “The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance.”

It didn’t say that this time.

CNN’s Matt Egan asked Federal Reserve Chair Jerome Powell whether that meant the Fed is now more concerned about inflation or employment. But Powell said it’s actually something much more benign.

“Actually it does not mean either of those things,” Powell said. “Sometimes with language it lives its useful life, and then we take it off. And that was the case. It was really not meant to be any signal here.”

Powell said it was useful language when the Fed started to transition out of punishing rate hikes to lowering rates or keeping them steady.

“We are past that,” Powell said. “So we just took it out.”

Federal Reserve Chair Jerome Powell acknowledged that the risk of recession may have grown in recent months, but he tried to soothe nerves by noting that the likelihood of an imminent economic downturn remains quite low.

“There is always an unconditional possibility of recession. It might be broadly in the range of 1 in 4 at any time if you look back through the years,” Powell said. “The question is whether this current situation — those possibilities are elevated.”

Powell noted that the Fed doesn’t make a recession forecast, although the Atlanta Fed has a “GDPNow” tool that currently predicts the economy is on pace for a slight contraction this quarter. He also noted that outside forecasters have raised the chance of a recession in recent weeks: JPMorgan now believes America faces a 40% chance of tumbling into a recession this year largely because of President Donald Trump’s tariffs and other economic policies.

“Forecasters have generally raised – a number of them have raised their possibility of a recession somewhat. But still at relatively moderate levels,” Powell said. “If you go back two months, people were saying that the likelihood of a recession was extremely low. So it has moved, but it’s not high.”

US stocks soared Wednesday as Federal Reserve Chair Jerome Powell signaled confidence in the economy despite uncertainty.

The Dow rose about 580 points, or 1.4%, to its highest level of the day. The broader S&P 500 rose 1.75% and the Nasdaq Composite rose 2.3%.

The Fed revised up its outlook for inflation and revised down its expectations for economic growth, but investors still rallied on the absence of a major surprise about rate cuts.

The three major indexes surged during Powell’s post-meeting press conference. Powell in remarks said the economic data shows overall “a solid picture,” while acknowledging there is uncertainty about the impact of tariffs.

The yield on the 10-year Treasury edged lower to 4.251%.

Wall Street gained on the steady rate decision Wednesday, but some analysts sense further turmoil on the horizon.

“No surprise that the monetary policy-setting committee kept target rates unchanged today,” said Jeffrey Roach, chief economist at LPL Financial. “The committee is in the midst of policy fog as they await the impact from upcoming tariffs.”

“As growth prospects falter and inflation remains sticky, we should expect investors to get more worried about stagflation,” Roach said.

Steve Wyett, chief investment strategist at BOK Financial, said the Fed’s statement indicates it “remains as confused as the rest of us as to what the impact of policy changes will be.”

“Clarity remains lacking for the market,” Wyett said.

There’s a growing possibility of zero rate cuts this year. That’s according to new projections that Federal Reserve officials submitted at this month’s monetary policy meeting.

Each quarter, all 19 Fed officials who attend monetary policy meetings are individually required to forecast where they believe interest rates will be by year’s end to achieve their dual mandate for price stability and maximum employment.

The median projection still predicts two rate cuts this year, unchanged from December, the last meeting such forecasts were made.

However, what’s changed is now eight officials are predicting one or no cuts this year compared to four officials in December.

Federal Reserve Chair Jerome Powell didn’t waste any time talking the “T-word” that is dominating discussions about the economy: tariffs.

In the first question of his post-meeting press conference Wednesday, Powell said it was difficult for the Fed to break out how much of the central bank’s jacked-up inflation forecast and vastly reduced economic growth predictions was because of tariffs, although he acknowledged that “a good part of it is coming from tariffs.”

Interestingly, Powell mentioned another “T-word”: “transitory.” The Fed got in some trouble a few years ago when inflation began to rise and Powell at first described it as “transitory.” As it turned out, inflation remained stubbornly high for several years.

Some economists argue that tariffs aren’t actually inflationary — they’re just a one-time price increase. In other words, they are transitory — a price increase comes, then it’s baked in, unlike other factors such as growing paychecks or supply chain snarls that can continue to raise prices for a long time.

Powell appeared to make that argument Wednesday, although he said it was too soon to know. He noted inflation was transitory “the last time there were tariffs” during Trump’s first term.

“It can be the case that it’s appropriate sometimes to look through inflation if it’s going to go away quickly without action by us — if it’s transitory,” Powell said. “And that can be the case in the case of tariff inflation. I think that would depend on the tariff inflation moving through fairly quickly.”

The Fed has a difficult enough task: It needs to make sure it can promote both high employment and low inflation, which can be competing goals. But President Donald Trump’s tariffs are complicating that delicate balancing act.

In its economic projections issued Wednesday, the Fed substantially revised down its forecast for economic growth while it jacked up its inflation expectations. The reason: “A good part of it is coming from tariffs,” Fed Chair Jerome Powell said during a press conference Wednesday.

That’s because tariffs both raise prices and can slow down the economy — the opposite of what the Fed is trying to do.

“It speaks to the adverse impact of the surge in US import tariffs underway, which will raise the prices of imported finished consumer goods and the cost to US firms, said Brian Coulton, Fitch Ratings’ chief economist. “This is making the Fed’s job a lot harder and means they will hold off on further rate cuts for quite a while.”

It’s an uncomfortable double whammy: inflation heating up at the same time unemployment grows. That’s exactly what Federal Reserve officials forecast will happen this year, according to new projections released Wednesday.

Officials believe the US unemployment rate will hit 4.4% by year’s end and that inflation, as measured by the Personal Consumption Expenditures price index, could rise to 2.7%.

That’s an uptick from the 4.3% unemployment rate and the 2.5% inflation rate officials projected for 2025 in December. It’s also a jump from the latest levels, with the unemployment rate at 4.1%, per the February jobs report, and PCE inflation, which was running at 2.5% in January.

Broadly speaking, it gives slight whiffs of stagflation, a situation where economic growth declines while prices jump. But as Fed Chair Jerome Powell said last year when there was a rise in the inflation and unemployment rates, it’s a huge stretch to refer to it as stagflation.

“I was around for stagflation. It was 10% unemployment. It was high single-digits inflation and very slow growth,” he said last May, referring to stagflation in the 1970s after a spike in oil prices during the Arab oil embargo.

The Federal Reserve likes to remind us that it has multiple arrows in its quiver to maintain America’s balance between strong economic growth and low inflation. Setting the interest rate is its most famous tool, but the Fed can also support job growth or reduce inflation by buying or selling government debt — a process known as quantitative tightening or quantitative easing.

The Fed has been in a quantitative tightening phase since 2022, selling off its massive hoard of Treasury bonds as inflation soared. In theory, QT, as it’s known, should help reduce demand for Treasuries, sending yields higher to make them more attractive. Higher yields often are mirrored by higher rates on consumer loans, such as mortgages, credit cards and car loans.

On Wednesday, the Fed said it would continue QT, but it would slow the pace down a bit. Inflation remains stubbornly high but much closer to the Fed’s 2% target than in previous years. Meanwhile, the Fed said economic growth has stabilized, as has the unemployment rate.

Starting in April, the Fed will sell up to $5 billion worth of Treasuries a month, down from $25 billion. In theory, that should help reduce bond yields — and help businesses spend more and consumers borrow more, giving the economy a slight boost.

President Donald Trump’s policies remain a big wild card for the Fed because of their potentially wide-ranging effects on the economy.

Trump’s tariffs threaten higher inflation and weaker growth, his administration’s aggressive crackdown on immigration can cause labor shortages in certain industries, his mass layoffs of federal workers could send some local economies into a recession, but his deregulation efforts and the extension of his 2017 tax cuts could promote growth.

Put together, it’s unclear what the “net effect” of Trump’s policies on the US economy will be, as measured by growth, inflation and the labor market.

US stocks were higher Wednesday after the Federal Reserve announced its decision to hold rates steady.

The Dow rose 230 points, or 0.56%. The broader S&P 500 rose 0.8% and the Nasdaq Composite rose 1.2%.

The three major indexes held on to their gains and edged higher after they had started to slide in the early afternoon ahead of the Fed’s announcement.

The Fed’s decision to hold rates steady was in line with investors’ expectations. Fed officials forecasted two rate cuts this year, according to projections, holding that outlook steady.

The Fed in a statement said inflation “remains somewhat elevated” and revised its year-end forecast for its preferred inflation gauge to 2.8%, up from 2.5%.

“Uncertainty around the economic outlook has increased,” the Fed said in a statement.

Traders had begun factoring in the potential for “higher-for-longer” rates back in December, after the Fed signaled that it might put a pause on cutting rates in early 2025.

The yield on the 10-year Treasury edged lower to 4.277%.

The US dollar index, which measures the dollar’s strength relative to six other currencies, edged lower after slightly gaining this morning.

Investors will be focused on Fed Chair Jerome Powell’s remarks at 2:30 p.m. ET.

Perhaps the biggest news from the Federal Reserve’s March monetary policy meeting was that officials believe the economy is on track to grow at a much slower pace now compared to before President Donald Trump returned to the White House.

Officials now believe US gross domestic product will grow at an annual rate of 1.7%, whereas in December they projected a 2.1% pace, according to new median forecasts that were released Wednesday afternoon. The revised estimate represents a nearly 20% decline in the annual projected US economic growth rate.

This comes as Trump’s tariff policies have taken a considerable toll on the economy, with both consumer and business sentiment plunging. In addition, consumer spending, the backbone of the US economy, which accounts for more than two-thirds of US GDP, has been flashing a big warning sign. It declined in January and while it increased last month compared to the prior month, it was well below economists’ expectations.

The Fed’s projections, however, look relatively good compared to the Atlanta Fed’s real-time GDP forecasting tool, which is currently pointing to a first-quarter decline in GDP.

Federal Reserve officials forecast two rate cuts this year, according to new median projections released Wednesday.

That’s the same number they penciled in at December’s monetary policy meeting, the most recent time officials submit interest rate projections.

This comes as economic conditions have worsened since President Donald Trump returned to the White House with the prospect of much higher tariffs on top of the ones that he’s already enacted.

The Federal Reserve on Wednesday kept interest rates unchanged as central bank officials weigh the impact of President Donald Trump’s aggressive economic agenda.

Wednesday’s decision, which comes at the conclusion of the Fed’s two-day monetary policy meeting, shows that central bankers are waiting for evidence that inflation is headed toward their 2% target — or that the economy is weakening more than expected.

Those are the two outcomes that would put rate cuts back on the table. Officials still expect to trim borrowing costs twice this year, according to their latest economic projections released Wednesday.

The Fed’s key borrowing rate remains in the 4.25% to 4.5% range. Standing pat also allows Fed policymakers to see how the Trump administration’s flurry of policy changes ultimately affects the US economy. That includes hefty tariffs, mass deportations and a downsizing of the federal workforce.

Officials in their policy statement acknowledged the higher level of uncertainty these days, a lot of it stemming from Trump’s shock therapy. In recent speeches, officials have said they’re willing to adjust interest rates in either direction, depending on what economic figures show.

The Federal Reserve on Wednesday is expected to hold borrowing costs steady for the second time in a row, extending a holding pattern that could stretch into the summer.

The Fed’s June meeting currently has the highest chance of a quarter-point rate cut, according to futures, with traders seeing good chances of another cut sometime in the second half of the year.

Most economists are forecasting at least one rate cut in 2025. Fed officials in January penciled in two rate cuts for this year, and that projection is expected to hold in their latest set of forecasts to be released Wednesday.

Morgan Stanley economists project just one rate cut this year, happening in June, while Goldman Sachs sees two rate cuts. Meanwhile, Bank of America doesn’t forecast any rate cuts at all this year.

However, expectations can always shift in either direction, depending on how the economy evolves. It remains to be seen what the net effect of Trump’s policies — ranging from tariffs to mass deportations — will be on the US economy. Fed Chair Jerome Powell said earlier this month that officials need to see how those policies show up in the data before determining whether to stand pat some more, resume cutting, or begin hiking again.

Spending at US retailers last month was much weaker than expected, in a troubling sign that the American shopper could be starting to tap out.

Retail sales rose 0.2% in February from the prior month, the Commerce Department said Monday, up from January’s downwardly revised 1.2% decline. That was much lower than the 0.7% increase economists projected in a FactSet poll. The figures are adjusted for seasonal swings but not inflation.

President Donald Trump’s whipsawing trade spat with America’s biggest trading partners has spurred high levels of uncertainty among consumers and businesses. That skittishness has been evident across many consumer surveys and now shoppers seem to be adjusting their purchasing behavior accordingly. Retail sales account for about a third of overall spending in the US.

Weak consumer spending figures are adding to concerns that the US economy is slowing, and perhaps heading into a recession. Monday’s retail report didn’t ease those fears.

Read more here.

Up until recently, Federal Reserve officials have avoided commenting on how the prospect of higher tariff rates could factor in to their thinking on where interest rates should be. Now, it’s no longer a theoretical event that could happen — tariff rates have indeed risen.

So far, President Donald Trump has enacted 20% tariffs across all Chinese imports, 25% across goods coming from Mexico and Canada that don’t comply with the terms of the USMCA trade deal and 25% tariffs on all steel and aluminum shipped to the US. On top of that, Trump has also threatened to impose a slew of tariffs come April 2 as part of his goal to correct what he perceives as trade imbalances. That has forced Fed officials to begin addressing the big tariff question.

Generally, economists agree that higher tariffs will cause prices to increase. But there’s less of a consensus when it comes to whether it will result in one-time price increases of goods or fuel higher inflation.

Fed Chair Jerome Powell said he remains torn over how Trump’s tariffs will impact the economy, especially with considerable uncertainty over how long any new tariffs will remain in effect. For now, he and his colleagues at the Fed are taking note of recent surveys pointing to short-term inflation expectations increasing, a potentially worrisome sign if it impacts longer-term expectations. That doesn’t appear to be the case so far.

But if, eventually, Fed officials believe tariffs will result in one-time price increases, “it’s not appropriate to react to it,” Powell said at an event earlier this month hosted by the University of Chicago. In contrast, if tariffs prove to be inflationary, the Fed may opt to raise interest rates.

Still, that doesn’t necessarily have to happen.

“I would point people back to 2019, when we had the Tax Cuts and Jobs Act, we had lower immigration… We wound up cutting three times because growth weakened so much, Powell said. “It’s really the effect of all of these policies that matters for our policy. It’s not simply what’s happening with tariffs.”

Not long ago, economists debated whether the Federal Reserve had finally pulled off the elusive “soft landing,” an extremely rare scenario in which inflation is tamed without a recession.

Now, many economists are debating whether President Donald Trump’s haphazard trade war will result in “stagflation,” a situation in which growth flattens or turns negative as inflation picks up. That’s any central banker’s worst nightmare and it plagued the Federal Reserve in the 1970s.

Most economists have said that Trump’s tariffs will raise costs for US-based importers, which will be passed on to businesses and then, eventually, to consumers. So far, Trump has imposed tariffs on steel and aluminum; and doubled duties on China to 20% on top of existing tariffs. The European Union and Canada have already retaliated to Trump’s metals tariffs.

But Trump says he’s just getting started. On April 2, the Trump administration is expected to unveil so-called reciprocal tariffs, a broad reconfiguration of US trade policy to match the duties foreign countries impose on the United States, dollar for dollar. Trump describes it simply: “If they’re charging us, we’re charging them.”

Economists say that’ll not only boost inflation, but it could eventually weaken economic growth as well. And there have already been signs of America’s economic engine — consumer spending — possibly beginning to sputter.

“It’s hard to say how these opposing forces will balance out in the end, and that’s what the Fed is having to consider right now,” Tom Bruce, macro investment strategist at Tanglewood Total Wealth Management, told CNN. “They’re data dependent, so they’re not making any moves at this meeting, but Powell will have to express that they’re watching the situation closely and staying prepared to make a policy change if necessary.”

US stocks gained in the early afternoon Wednesday as investors tried to rally ahead of the Federal Reserve’s announcement on rates.

The Dow rose 240 points, or 0.58%, pulling back slightly after gaining 360 points. The broader S&P 500 rose 0.7% and the Nasdaq Composite gained 0.9%.

Wall Street will be fixated on Fed Chair Jerome Powell’s remarks at 2:30 p.m. ET and eager for positive signals about the trajectory of the economy.

Fed rate decision days under Powell have often seen “extreme weakness” in the last 60 to 75 minutes of the trading day, according to Bespoke Investment Group.

“There have been plenty of Powell Fed Days that have seen strength into the close, but the overall average trend has been a late-day selloff that more than erases intraday gains,” analysts at Bespoke Investment Group said in a Wednesday note.

For example, at its December meeting, the Fed cut rates, but revised its expectation for rate cuts in 2025 to two cuts, down from the previously expected four. That shift jolted markets and sent the Dow tumbling more than 1,100 points.

While Powell will likely remain tight-lipped about any potential signs of weakness in the economy, investors will pore over the Fed’s Summary of Economic Projections and markets could shift just based on how Wall Street perceives Powell’s remarks.

“We expect volatility around the [Fed’s] press conference, as we are still in a very headline-driven and headline-sensitive market,” said Michael Rosner, managing director at Raymond James.

Many on Wall Street are betting Federal Reserve officials will keep intact their forecast for two interest rate cuts this year.

Yet the world looks very difference since the Fed last updated its so-called “dot plot” in December. The trade war has heated up. Inflation has stalled. And recession fears have rocked markets.

“A lot has changed since then. It feels like it’s been an eternity,” said Stephanie Roth, chief economist at Wolfe Research.

Economists expects the Fed officials will reflect this new environment by downgrading their 2025 growth forecast and bumping up their inflation forecast.

Roth said the Fed will likely still signal two rate cuts this year, but cautioned there is a risk officials “surprise” investors by removing one cut to reflect hotter inflation and greater risks from tariffs.

“Markets would not like that,” Roth said.

In a report to clients, Goldman Sachs economists said they “suspect” Fed leaders would prefer the dot plot still signals two cuts this year “to avoid adding to recent market turbulence, even if this might be somewhat awkward to explain.”

Days after taking office two months ago, President Donald Trump said he would “demand that interest rates drop immediately.” It followed a string of comments he made on the campaign trail and since he was elected calling for him to have a greater say in interest rate decisions the central bank makes.

But lately, Trump has had little to say about the Fed and what actions it takes on interest rates. That’s not a coincidence, Treasury Secretary Scott Bessent said at an event hosted by the Economic Club of New York earlier this month.

Bessent said he and Trump have come to recognize that the Fed’s rate cuts last year didn’t result in Americans paying lower interest rates because yields on 10-year Treasury notes rose.

Those yields serve as a bellwether for the interest rates Americans pay to borrow money. Generally, when the Fed cuts rates, those move down, too. But that didn’t happen last year as investors began to believe that it could be a while before the Fed lowers rates again.

So, rather than attempt to pressure the Fed to cut rates, a controversial move given the agency’s long-respected independence, Bessent said he and Trump are focusing on lower 10-year Treasury yields. “Sound fiscal policy,” such as cutting back on government spending, he said will help bring down those rates.

Read more here.

Federal Reserve Chair Jerome Powell is scheduled to take questions in a press conference at 2:30 p.m. Wednesday.

He could soothe economic jitters — or, if he’s not careful, he could amplify them.

Investors will be watching very closely to see how much Powell pushes back on recession fears, how worried is he about the lack of clarity on tariffs, and how crumbling consumer confidence factors in to the Fed’s calculus on rates.

Recession has, once again, become the buzzword across Wall Street after President Donald Trump recently declined to rule one out, saying that Americans should expect “a period of transition” across the economy.

Since his comments, Trump administration officials have offered varying answers when asked about the likelihood of a recession, with Commerce Secretary Howard Lutnick saying, “I would never bet on recession. No chance.” However, Treasury Secretary Scott Bessent said Tuesday, “I can’t guarantee anything.”

Investors will be keen to hear where Federal Reserve Chair Jerome Powell stands on the matter. However, he’s unlikely to veer away from his usual script if asked about the odds of a recession.

The only thing Powell tends to say with conviction is that the US economy is not currently in a recession, which he testified in a Senate hearing last month.

“Would you, as an American, trade places right now with Germany in terms of the economy?” Republican Sen. John Kennedy asked Powell on February 11. “No, I sure wouldn’t,” he responded, later adding that he wouldn’t want to trade places with China or France either.

Even though US economic conditions have changed significantly since Powell made those comments, which could very well lead him to believe that the risk of a recession has risen, he’ll likely never say so.

That’s because even the most subtle suggestion that the economy is inching closer to a downturn could spook investors and work against the Fed’s mission.

Rather, Powell may opt to repeat what he said two years prior: “There’s always a probability that there will be a recession in the next year.”

US stocks gained Wednesday ahead of the Federal Reserve announcement on rates, set to be announced at 2 p.m. ET.

Just over 60% of companies in the broad S&P 500 index were trading higher Wednesday morning, according to FactSet data. Just over two-thirds of stocks in the 30-company blue-chip Dow index were trading higher.

Tech stocks pushed markets higher Wednesday morning as members of the “Magnificent Seven” like Tesla (TSLA) and Nvidia (NVDA) rebounded after recent declines.

Tesla shares surged during early trading and were up 4.9% Wednesday morning after sliding on Tuesday.

Nvidia shares were up 1.6% after closing lower on Tuesday. The artificial intelligence chip giant on Tuesday announced fresh details about its AI chip platform, Blackwell Ultra.

Meta (META), down just 0.2%, was the only Magnificent Seven stock trading lower Wednesday morning.

Other notable gainers included Boeing (BA), which popped almost 7% after the CFO made positive remarks about the company’s progress to start the year. Yet he also highlighted concerns about the future impact of tariffs.

Signet Jewelers (SIG), which owns retailers like Kay Jewelers, surged 22% in early trading after the company posted better-than-expected earnings.

Elsewhere, Shopify (SHOP), an e-commerce company, gained more than 6% after it announced it would move its listing to the Nasdaq from the New York Stock Exchange.

On the downside, Intel (INTC) slid more than 6%.

General Mills (GIS), the maker of Cheerios, slid 2% after the company cut its sales forecast, citing slowing demand for snacks.

The Federal Reserve is not expected to announce a rate cut today. But when it does, it will be important to note that not all rate cuts are created equally.

Central banks tend to lower interest rates for one of two reasons: Either inflation has come down significantly to the point where leaving interest rates unchanged would hurt the economy — or the economy is already hurting and it needs a boost.

Federal Reserve Chair Jerome Powell insisted on the former rationale for last year’s rate cuts, including the unusually large half-point cut in September. But as the economy now shows more signs of weakening, the Fed may opt to cut rates to prevent matters from worsening even further.

So, while investors have been clamoring for rate cuts as inflation slowly eased its way closer to the Fed’s target rate of 2%, they may want to hold off on celebrating on Wednesday. Because if Fed officials forecast two or more rate cuts this year, that’s not necessarily a good thing.

Markets are on the fritz and investor sentiment has slumped into “extreme fear” territory. Consumer confidence readings have cratered and surveys show a sharp turnabout in Americans’ feelings about their future financial well-being. Any positive reports are described by economists as the “calm before the storm.”

The common denominator is pure and utter uncertainty — particularly about just how President Donald Trump’s sweeping policy actions could shake out, economists say.

However, when the topics of the economy, volatile markets, shaken confidence and sudden recession fears have been broached with Trump, he’s hammered on familiar notes: That the Biden administration left him with an economic situation that was “catastrophic,” a “nightmare,” “horrible,” or “damaged.”

Still, data aside, the economy didn’t feel great to all Americans who suffered through the highest inflation in decades, and those sour feelingshelped send Trump back to the White House for a second term.

Such claims have become a hair-pull for economists, statisticians, academics and fact-checkers alike: By most gold-standard measures, President Joe Biden handed Trump a booming economy.And, if anything, the economy was ripe for a resurgence in early 2025 under Trump, economists have told CNN.

Read more here.

On Tuesday, two Democratic commissioners of the Federal Trade Commission said they were “illegally fired” by President Donald Trump. That could be a bad omen for the Federal Reserve.

In a letter reported by the Wall Street Journal, Trump said the two commissioners were “inconsistent with my administration’s priorities.” Trump has frequently criticized the Fed for its policy decisions, and the sacking of the FTC’s Rebecca Slaughter and Alvaro Bedoya already sets a precedent Trump could use to go after Fed governors, who serve 14-year, staggered terms.

“There are other similarities in the laws that established the two agencies,” Brian Gardner, chief Washington policy strategist at Stifel Financial, said in commentary issued Wednesday. “The administration’s justification for firing FTC officials should also extend to the Fed. If the administration therefore thinks it can fire FTC Commissioners over policy disagreements, then logically it should be able to fire Federal Reserve Board Governors.”

The courts will likely rule on the legality of the FTC firings, but even without that decision to provide clarity, there are other guardrails preventing Trump from firing Fed governors

“We still believe the President lacks the power to remove Federal Reserve governors as Article 1, Section 8 of the U.S. Constitution grants to Congress the power to not just coin money but also to regulate the value of it,” Jaret Seiberg, financial services and housing policy analyst at TD Cowen Washington Research Group, wrote in an analyst note Tuesday.

“It is why we believe the Fed’s monetary policy functions are a delegation of legislative power rather than of executive branch power,” he said.

Federal Reserve officials agree that the air is rife with uncertainty these days. However, what matters most to central bankers is what the economic data shows.

It’s unclear how the US economy will ultimately respond to President Donald Trump’s shock therapy, but at the moment, nothing has broken yet. There is no urgent need for the Fed to provide relief with another rate cut, and in recent months, inflation’s slowdown seemed to have stalled out, making a case for the Fed to hold off on rate cuts.

“The costs of being cautious are very, very low,” Fed Chair Jerome Powell said earlier this month at an event in New York. “The economy is fine, it doesn’t need us to do anything, really, and so we can wait and we should wait.”

Most Fed officials have suggested in recent speeches that monetary policy is in a good place and that they’ll move rates in either direction accordingly, depending on what the data shows.

Investors expect the Fed to hold rates steady until the summer, according to futures, with the June meeting currently having the highest likelihood of a quarter-point rate cut.

US stocks opened higher Wednesday as investors await the Federal Reserve’s rate decision.

The Dow opened higher by 112 points, or 0.3%. The broader S&P 500 was 0.4% higher and the tech-heavy Nasdaq Composite moved up by 0.6%.

The S&P 500 is coming off a day in the red after gaining the two previous trading days. Investors will be keen to resume that brief rally. Yet US stocks have been volatile as uncertainty looms about the impact of President Donald Trump’s tariffs.

Investors expect the Fed to hold rates steady and will be highly attuned to remarks from Fed Chair Jerome Powell, as well as central bankers’ new quarterly Summary of Economic Projections.

“While no changes are expected, markets will closely scrutinize policymakers’ economic and interest forecasts and Chair Powell’s comments for clues about the future path of monetary policy,” said Bill Adams, chief economist at Comerica Bank.

Wall Street will be looking for any changes in the Fed’s outlook for 2025, in particularly due to recent market turmoil caused by Trump’s tariff announcements.

“The landscape has changed since the last Fed meeting in January, and this will be the first Fed meeting since the markets started to react negatively to trade tensions,” said Michael Rosner, managing director at Raymond James.

Investors are all but certain the Federal Reserve will hold interest rates steady at this month’s meeting. Far less certain, however, is what the Fed will do at upcoming meetings this year.

That’s why investors will be paying much closer attention to the Fed’s so-called “dot plot,” set to be released at 2 pm ET, than the Fed’s announcement on interest rates, which also comes out then.

The dot plot refers to the Fed’s Summary of Economic Projections, a quarterly forecast on the economic outlook from all 12 regional Fed bank presidents and the seven members of the Fed’s board of governors.

Their forecasts are anonymous and are displayed simply as a dot on a plot — hence the moniker.

Among the projections Fed officials have to make about the economy for the remainder of this year, 2026, 2027 and over the longer run is where they believe interest rates should be to fulfill their mandate for price stability and maximum employment. In other words, the dot plot will reveal how many more rate cuts we could expect this year and further out in the future.

But there’s a major caveat: These are simply projections, and could change as the economic conditions evolve, as Powell has repeatedly said.

The most recent dot plot from December’s meeting indicated the median forecast was for two rate cuts this year. That’s half the number of cuts in 2025 predicted at September’s meeting. With inflation remaining sticky and concerns that it could reaccelerate with the imposition of higher tariffs, officials could pencil in fewer or even no cuts at all this year.

Central bankers are almost certain to hold interest rates steady at the conclusion of their March meeting on Wednesday.

Federal Reserve Chair Jerome Powell will likely reiterate that the economy remains in decent shape, but the bank’s latest projections will probably show the economy is trending toward stagflation, economists say.

Powell’s tough job is to now communicate to an anxious America how the Fed will handle that looming threat.

Before President Donald Trump took office, there were already signs that inflation’s descent was stalling out, which was a big reason why the Fed stopped cutting interest rates in January. The Fed’s solution for that was simple: Stand pat until inflation slows again.

January’s decision wasn’t hard because the economy looked to be in good shape, with low unemployment and steady growth. Fed officials may not have that luxury for much longer.

Various surveys show Americans’ perceptions of prices are changing for the worse. Several Fed officials have said that they would be worried if long-run inflation expectations begin to climb.

That could force the Fed to consider hiking interest rates, even if it means unemployment rises.

Read more here.

US stock futures were slightly higher Wednesday morning ahead of the Federal Reserve’s rate decision, set to be announced at 2 p.m. ET.

Dow futures gained 0.1% and S&P 500 futures rose by 0.2%. Futures tied to the Nasdaq 100 were up by 0.3%.

It’s been a dizzying month for US markets. Investors are still wading through clouds of uncertainty surrounding President Donald Trump’s economic and foreign policy, and it has been difficult for US stocks to sustain a rally.

After the S&P 500 closed in correction last Thursday, down 10.1% from its record high on February 19, the benchmark index rallied Friday and Monday, posting its first back-to-back gains since it notched that record high. Trump’s tariff announcements, which sent markets into a tailspin earlier this month, have been relatively quiet in recent days. Investors rallied on the relative calm.

Yet it wasn’t enough to push stocks higher for a third day in a row. The S&P 500 slid 1.07% on Tuesday, closing down 8.6% from its record high.

“The market has essentially gone nowhere despite all the highs and lows during the last 4.5 months,” analysts at Bespoke Investment Group said in a Tuesday note.

Traders expect a 99% chance the Fed will hold its benchmark interest rate steady, according to the CME FedWatch tool. Investors will be more keen to parse through the Fed’s first summary of economic projections for this year, which could provide insight about expectations for economic growth, inflation and future rate decisions.

“Extreme fear” has been the sentiment driving markets since the end of February, according to CNN’s Fear and Greed Index.

There’s just a 1% chance of a rate cut from the Federal Reserve today.

Fed officials are in no rush to move rates in either direction, because they’re navigating the fog of a trade war that could simultaneously hurt growth and boost prices.

But the big focus today is on the first set of projections from the Fed since December. Economists expect the Fed will downgrade its view on economic growth and lift its inflation forecast.

It’s unclear if the Fed will still pencil in two rate cuts this year.

The magnitude of the changes to the Fed’s forecast will speak volumes about how concerned (or unconcerned) officials are about President Donald Trump’s trade war.