Weaker growth, higher inflation ‘balance each other out’ in Fed forecast, Powell says
U.S. Federal Reserve Chair Jerome Powell speaks at a press conference, following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington, D.C., U.S., March 19, 2025.
Nathan Howard | Reuters
Fed Chair Powell said that the central bank’s forecasts for less economic growth and higher inflation in 2025 somewhat offset each other, explaining the fact that the forecast for rate cuts this year stayed at two.
“At the December meeting, the median was two cuts. So you come in and you see, broadly speaking, weaker growth but higher inflation. And they kind of balance [each other] out,” he said.
Again, Powell emphasized that the forecasts are “highly uncertain.”
— Jesse Pound
Fed Chair Powell said economists outside of the central bank have generally moved up their estimated chance of a recession, but such a severe economic downturn is still not likely.
“We don’t make such a forecast. If you look at outside forecasts, forecasters have generally raised … their possibility of a recession somewhat, but still at relatively moderate level … [it] has moved up, but it’s not high,” he said.
Powell noted that there is also always an unconditional probability of a recession, in the range of one in four at any time.
— Yun Li
U.S. Federal Reserve Chair Jerome Powell speaks at a press conference, following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington, D.C., U.S., March 19, 2025.
Nathan Howard | Reuters
Federal Reserve Chair Jerome Powell acknowledged that a “good part” of the higher inflation forecast the central bank made Wednesday has to do with tariffs.
“Some of it, the answer is clearly some of it, a good part of it, is coming from tariffs,” Powell said during the postmeeting presser. “But we’ll be working with other forecasters to separate nontariff inflation [from] tariff inflation.”
The Fed downgraded its economic growth outlook while raising its inflation projection. The central bank now sees the U.S. economy growing at a 1.7% pace this year, down 0.4 percentage points from what it forecast in December. Core inflation is expected to grow at a 2.8% annual pace, up 0.3 percentage points from the prior reading.
— Sarah Min, Jeff Cox
The Federal Reserve will be carefully watching for signs of weakness in the real economic data, Chair Jerome Powell said.
Right now, the hard data has been pretty solid, although survey data has shown significant rises in uncertainty and concerns about downside risks. However, the relationship between survey data and economic data hasn’t always been very tight, Powell noted.
“We think our policy is a good place to react to what comes,” he said. “We think the right thing to do is to wait here for greater clarity about what the economy is doing.”
— Michelle Fox
Fed Chair Powell said the Fed was getting “closer and closer” to price stability but that tariffs might lengthen the process.
“I do think with the arrival of the tariff inflation, further progress may be delayed,” Powell said.
The Fed chair pointed out that the central bank does project inflation to fall in 2026 and 2027, though he said those estimates are “highly uncertain.”
— Jesse Pound
Fed Chair Jerome Powell said in a news conference that the central bank is seeing tariffs as putting upward pressure on inflation expectations.
“Some near-term measures of inflation expectations have recently moved up. We see this in both market and survey based measures. And survey respondents, both consumers and businesses, are mentioning tariffs as a driving factor,” he said.
“Looking ahead, the new administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy and deregulation. It is the net effect of these policies that will matter for the economy and for the path of monetary policy,” he added.
— Fred Imbert
U.S. Federal Reserve Chair Jerome Powell speaks at a press conference, following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington, D.C., U.S., March 19, 2025.
Nathan Howard | Reuters
The Federal Reserve is comfortable keeping interest rates at an elevated level if the economy remains strong, according to Fed Chair Powell.
“If the economy remains strong, and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer,” Powell said Wednesday.
“If the labor market were to weaken unexpectedly, or inflation were to fall more quickly than anticipated, we can ease policy accordingly,” he added.
— Brian Evans
Fed Chair Powell described the U.S. economy as “strong overall” but did acknowledge some signs of weakness among consumers.
“Recent indications, however, point to a moderation in consumer spending following the rapid growth seen over the second half of 2024,” the Powell said.
— Jesse Pound
The Federal Reserve’s cautious tone was expected as it waits to see what develops in the economy, said Whitney Watson, Goldman Sachs Asset Management’s global co-head and co-chief investment officer of fixed income and liquidity solutions.
“Revisions to FOMC members projections had a somewhat ‘stagflationary’ feel with forecasts for growth and inflation moving in opposite directions,” she said. “For the time being the Fed is in wait and see mode, as it monitors whether the recent growth slowdown develops into something more serious.”
— Michelle Fox
The Federal Reserve is just “kicking the tires on the economy” right now, but it will likely be a different story for its next meeting in May, said Jim Caron, Morgan Stanley Investment Management’s chief investment officer of the portfolio solutions group.
Reciprocal tariffs are supposed to go into effect in early April, he noted. Plus, he doesn’t expect a lot of good news when first-quarter earnings results come out.
“April data, the events of April — I can’t underscore this enough — are going to be extremely important and I think the tone is going to be changed by May 7th at the next meeting,” Caron said on CNBC’s “Power Lunch.”
He thinks that meeting will tee up a rate cut in June.
— Michelle Fox
Though the Federal Reserve’s outlook calls for two rate cuts this year, the central bank’s picture of the economy looks murky.
Policymakers now see the economy growing at a 1.7% pace this year, down 0.4 percentage points from their previous forecast in December.
They also see core prices growing at a 2.8% annual pace, up 0.3 percentage points from the last projection.
Read more from CNBC’s Jeff Cox on the Fed’s latest economic projections here.
— Darla Mercado
March’s statement from the Fed looks somewhat different than the most recent one released in January.
The central bank cited growing uncertainty around the economy. Fed Governor Christopher Waller voted against the Fed’s decision, specifically citing a disagreement about the pace of reductions in security holdings.
— Alex Harring
The Federal Open Market Committee announced that it will slow the pace at which its balance sheet shrinks starting next month.
“Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion,” the statement said.
The central bank has been trying to reduce its balance sheet, which ballooned during the Covid-19 pandemic when the Fed tried to calm financial markets. The decision to slow that pace could be a factor in why the 10-year Treasury yield has moved lower since the statement was released.
Fed Governor Christopher Waller dissented from the decision to change plans for the central bank’s securities holdings.
— Jesse Pound
A television station broadcasts the Federal Reserve’s decision to leave rates unchanged, on the floor of the New York Stock Exchange on Jan. 29, 2025.
Michael Nagle | Bloomberg | Getty Images
At the conclusion of its March meeting, the rate-setting Federal Open Market Committee decided to keep interest rates at its target range of 4.25% to 4.5%. Markets widely anticipated that policymakers would hold steady this time.
Read more on the Fed’s decision from CNBC’s Jeff Cox here.
— Darla Mercado
The major averages could see a shake-up as Fed Chair Jerome Powell takes the podium for his press conference at 2:30 p.m. ET, notes Michael Rosner, private wealth advisor at Raymond James.
“The Federal Reserve is likely to keep rates unchanged at Wednesday’s meeting, but the landscape has changed since the last Fed meeting in January, and this will be the first Fed meeting since the markets started to react negatively to trade tensions,” he said.
“We expect volatility around the FOMC press conference, as we are still a very headline-driven and headline sensitive market,” Rosner added.
The fact that the Fed is issuing its quarterly projections for rate policy, inflation and other key economic data points could also rattle stocks.
Indeed, the last time the central bank delivered its forecast on Dec. 18 — where it slashed its rate cut outlook to two reductions in 2025, down from four — the S&P 500 lost nearly 3% and the Dow Jones Industrial Average tanked more than 1,100 points.
— Darla Mercado
Traders react as Federal Reserve Chair Jerome Powell is seen delivering remarks on a screen, on the floor of the New York Stock Exchange (NYSE) in New York City, March 22, 2023.
Brendan McDermid | Reuters
Central bank policymakers are expected to hold off on changes to interest rates at the conclusion of their March meeting, but their projections on what’s next for the economy and for rates will be key.
The Federal Reserve will shed some light on what may be next as it issues its quarterly forecast on rate policy, gross domestic product and inflation. That additional insight comes at a time when investors have been fretting over a raft of soft economic data and President Donald Trump’s trade policies.
The rate-setting Federal Open Market Committee will spell out its expectations for interest rates on its “dot plot,” where members share their outlook on whether rate cuts are in the cards this year.
Read more from CNBC’s Jeff Cox here on what to expect as the Fed issues its policy decision.
— Darla Mercado
The Federal Reserve is likely to keep rates at its target rate range of 4.25% to 4.5% at the conclusion of its two-day meeting Wednesday afternoon.
Consumers, who have been through the Fed’s rate-hiking cycle in 2022 and the three cuts in late 2024, have seen borrowing costs rise during that period.
Consider that a 30-year fixed-rate mortgage clocked in at 6.81% as of the week of March 14, up from 4.29% in the week of March 11, 2022, according to Mortgage News Daily. Rates on credit cards have also climbed, reaching 20.09% as of the week of March 14. That is up from 16.34% roughly three years ago, Bankrate found.
At the same time, consumers and fixed-income investors are earning more interest. The 10-year Treasury yield traded at 4.3% on Wednesday, up from around 2% in March 2022.
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The 10-year Treasury yield in 2025
The annual percentage yield on a five-year certificate of deposit was 1.9% last week, an improvement from the 0.5% yield on those instruments in March 2022, according to Haver. Still, the latest APY data shows that banks have trimmed back the interest they are willing to pay on CDs in recent months. The yield on a five-year CD was 2.87% last September, Haver found.
— Nick Wells, Darla Mercado
