President Donald Trump has urged the Federal Reserve to swiftly lower interest rates as tariffs begin to affect the U.S. economy.
Federal Reserve Warns of Economic Risks
The Federal Open Market Committee (FOMC) held its Wednesday meeting and decided to keep the benchmark interest rate steady at 4.25%-4.5% for the second time. However, economic forecasts are changing: growth is projected to slow to 1.7% from 2.1%, and inflation expectations rose to 2.8% from 2.5%. The Fed acknowledges increased risks to the economic outlook and is closely monitoring inflation and economic growth.
Push for Rate Cuts and Inflation Concerns
Inflation concerns are growing as Trump's trade policies affect American businesses. Tariffs on major U.S. trading partners are expected to raise costs for companies and consumers. Fed Chair Jerome Powell pointed out that 'inflation has started to move up, partly in response to tariffs,' and expressed concern about significant uncertainty among businesses and households. Despite this, the Fed expects to cut rates twice by the end of 2025.
Markets React to Fed's Announcements
Markets reacted to the Fed's announcement of plans to cut rates later this year. Dow Jones futures rose 71 points, S&P 500 futures increased by 0.3%, and Nasdaq 100 futures climbed 0.4%. Investors await data on jobless claims, the Philadelphia Fed's survey, and a report on home sales due Thursday.
The U.S. economy faces uncertainty with slower growth and rising inflation. The Fed is closely monitoring developments but has yet to adjust its interest rate policy.
