U.S. Fed keeps interest rate steady as Trump's policies incite uncertainty

The U.S. Federal Reserve is holding its key rate steady for the second session in a row amid concerns over slower growth and higher inflation as the U.S. adapts to tougher Trump tariffs.

Lee Soo-jin reports.

The U.S. Federal Reserve has decided to once again keep its benchmark interest rate unchanged, but signaled potential rate cuts in future meetings.

In its second monetary policy meeting of the year on Wednesday, the central bank kept its key borrowing rate steady at its current range of 4-point-2-5 percent to 4-point-5 percent.

The Federal Open Market Committee has put a pause in its rate cutting cycle since December last year, after carrying out three consecutive reductions.

The decision comes as Federal Reserve officials lowered their outlook for economic growth for this year to 1-point-7 percent from 2-point-1 percent in their December projection.

" uncertainty today is unusually elevated. As the economy evolves, we will adjust our policy stance in a manner that best promotes our maximum employment and price stability goals."

The Fed's goals of maintaining maximum employment and low inflation are often referred to as its "dual mandate."

Powell said that the uncertainty comes from the changes that policies, particularly trade,.. but also immigration, fiscal policy and regulation, will bring to the economy.

The rate-setting committee, which releases a summary of economic projections after its March, June, September, and December meetings, projected slightly higher unemployment of 4-point-4 percent from 4-point-3 percent by the end of the year.

Inflation was also forecast to rise, as personal consumption expenditure, a measure of consumer spending, and core inflation, which excludes energy and food prices, were both revised upward.

Powell acknowledged that tariffs have already contributed to the rise in inflation.

The Trump administration imposed 25% tariffs on steel and aluminum imports last Wednesday, triggering retaliatory tariffs from Canada and the EU, with reciprocal U.S. tariffs set for April 2nd.

But with officials expecting the Fed to implement a total of half a percentage point in rate cuts in 2025, two reductions are likely this year as rate cuts are typically in quarter-point increments.

This latest decision keeps the interest rate gap between South Korea and the U.S. at 1-point-75 percentage points, with the Bank of Korea slashing its key interest rate to 2-point-7-5 percent in its last meeting in February.

All three major U.S. stock indexes, the Dow Jones, S&P 500, and the Nasdaq, showed an upward trajectory following the Fed's decision.

Lee Soo-jin, Arirang News.