United States Interest Rate

The Fed kept the federal funds rate unchanged at 4.25%-4.5% during its March 2025 meeting, extending the pause in its rate-cut cycle that began in January, and in line with expectations. Policymakers noted that uncertainty around the economic outlook has increased but still anticipate reducing interest rates by around 50 bps this year, the same as in the December projection. Meanwhile, GDP growth forecasts were revised lower for this year to 1.7% from 2.1% seen in December. Growth projections were also revised down for 2026 (1.8% vs 2%) and 2027 (1.8% vs 1.9%). In contrast, PCE inflation is seen higher in 2025 (2.7% vs 2.5%) and 2026 (2.2% vs 2.1) but the forecast was kept at 2% for 2027. The unemployment rate is seen slightly higher this year at 4.4% (vs 4.3%) but the projection was held steady at 4.3% for both 2026 and 2027. In April, the Fed will slow the pace of decline of its securities holdings by reducing the redemption cap on Treasury securities from $25 billion to $5 billion.