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The Federal Reserve left interest rates unchanged at their March meeting, in line with market expectations. This is the second meeting in a row where they haven't changed the rates, which remain at 3.5%-3.75%. In remarks after the announcement, Federal Reserve Chair Jerome Powell cited continued challenges with inflation, which remains above the Fed's target annual rate of 2%. "The feeling that we haven't seen the progress we had hoped for on core goods, and on tariffs, and on the rest of it," he said.
Powell signaled there will be no rate cuts until they see progress on inflation, believing that will happen eventually on the current trajectory. "We will be making progress on inflation," he said. "Not as much as we had hoped, but some progress on inflation, and it should come as we start to see in the middle of the year."
In the meantime, Powell defended the Fed's stay-the-course approach to holding rates steady. "This normalization of our policy stance should continue to help stabilize the labor market, while allowing inflation to continue its downward trend toward 2%," he said.
The markets had been predicting two possible rate cuts before the end of the year, but after Powell's comments they are only pricing in a 50-50 chance at one rate cut later this year.
Powell may or may not be in his current position at the Fed's next meeting in June. His term expires in May, but he is allowed to remain Chair until his replacement is confirmed by the Senate. President Trump has nominated former Federal Reserve Board member Kevin Warsh as the next Fed Chair.