Fed keeps interest rates unchanged; what this means for you
"Transition period" coming for economy, says Trump
Alissa Coram of Investor’s Business Daily joins LiveNOW from FOX to discuss a "transition period" in the American economy as the Trump administration remakes import and export tax policy.
As expected, the Federal Reserve will leave interest rates unchanged – for now – as it changes the U.S. economic outlook and predicts slower growth than it did three months ago.
"Uncertainty around the economic outlook has increased," the Fed said in a statement released after its two-day meeting .
The Fed also now expects the economy to grow more slowly this year and next than it did three months ago, according to a set of quarterly economic projections also released Wednesday. It also expects the unemployment rate to tick higher, to 4.4%. Policymakers also expect inflation will pick up slightly by the end of this year, to 2.7% from its current level of 2.5%. Bother are above the central bank’s 2% target.
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The Fed does expect to cut interest rates later this year, but what were once seen as "good news" rate reductions in response to a steady decline in inflation back to the Fed’s target of 2%, now could become "bad news" cuts that would be implemented to offset an economy struggling in the wake of widespread tariffs, rapid cuts in government spending, and a spike in economic uncertainty.
The seal of the US Federal Reserve Board of Governors near the Marriner S. Eccles Federal Reserve building in Washington, DC, US, on Sunday, Jan. 12, 2025. The US Treasury market is leading a reset higher in borrowing costs, with potentially wide-ran
What do interest rates mean for you?
Why you should care:
When the Fed cuts its main interest rate, it makes it easier for U.S. businesses and households to borrow, helping to boost the economy. But lower interest rates can also push inflation upward, and Americans shell-shocked by high prices have already begun bracing for even higher inflation because of tariffs.
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Higher interest rates make it harder to qualify for a loan. According to Bankrate, a personal finance website, 48% of loan or financial product applicants were denied between December 2023 and December 2024. Interest rates have remained historically elevated post-pandemic.
Big picture view:
Uncertainty is widespread among global markets about what President Donald Trump’s trade war will do to the American economy and economies around the world. Trump’s barrage of announcements on tariffs and other policies have bred concerns that U.S. households and businesses could pull back on their spending, which would hurt the economy.
That complicates matters for the Federal Reserve.
The Fed expects to cut interest rates twice this year, though other policymakers and lenders predict fewer cuts.
The Source: This report includes information from The Associated Press, Bankrate and previous LiveNow from FOX reporting.