Fed still sees two rate cuts, to slow balance sheet reduction
Rate-setters in the US voted to stand pat on rates, but said that they would slow the pace at which the central bank reduced its balance sheet until a deal was reached on the government debt ceiling.
The target range for the Fed funds rate would therefore remain at 4.25-4.50%.
And while top officials' latest macroeconomic projections were for slower growth and higher growth due to the new administration's tariff policies, Fed chief, Jerome Powell, said his base case was that the resulting upwards pressure on inflation would be "transitory".
Furthermore, and despite the increased economic uncertainty, they continued to expect two more interest rates hikes over the course of 2025.
Powell also said that will the odds of a recession were now greater, they were not high, and described recent data pointing to a jump in inflation expectations as an outlier.