The Federal Reserve (Fed), the U.S. central bank, emphasized economic uncertainty on the 19th as it decided to keep interest rates unchanged.

Following a two-day Federal Open Market Committee (FOMC) meeting, the Fed announced on the 19th that it would maintain the benchmark interest rate at 4.25% to 4.50%.

This marks the second consecutive rate freeze this year. The Fed had previously held rates steady at its first meeting of the year on January 29��the first under the second Trump administration. The decision to freeze rates this time is seen as a response to a slowing trend in inflation relief, combined with heightened economic uncertainty due to President Trump��s ��tariff war.��

In its quarterly Summary of Economic Projections (SEP), the Fed forecasted a year-end benchmark rate (median) of 3.9%, implying two 0.25% rate cuts by year-end��a projection unchanged from December last year. This raises the likelihood of a rate cut at the May FOMC meeting.

Alongside this, the Fed downgraded its 2025 GDP growth forecast (median) by 0.4 percentage points, from 2.1% in December to 1.7%.

The year-end Personal Consumption Expenditures (PCE) inflation rate projection was raised to 2.7% (from 2.5%), and the core PCE inflation rate (excluding volatile food and energy items) was lifted to 2.8% (from 2.5%). The year-end unemployment rate forecast was slightly increased from 4.3% to 4.4%.

In a statement detailing the meeting��s outcomes, including the rate freeze, the FOMC noted, ��Recent indicators suggest that economic activity continues to expand at a solid pace.�� It added, ��The unemployment rate has stabilized at a low level in recent months, labor market conditions remain robust, and inflation has risen somewhat.�� The committee reiterated its commitment to achieving maximum employment and 2% inflation over the long term, while acknowledging that ��uncertainty surrounding the economic outlook has increased.��

However, Fed Chair Jerome Powell suggested that inflation spurred by Trump��s sweeping tariff policies might be temporary. At the press conference, Powell stated, ��If inflation is a temporary phenomenon that we expect to dissipate quickly without our intervention, it may sometimes be appropriate to overlook it.�� He continued, ��This depends on whether tariff-induced inflation passes quickly and is heavily influenced by whether long-term inflation expectations remain well-anchored.��

Powell also stressed that the U.S. is not currently at risk of a recession or stagflation (high inflation coupled with economic stagnation). Responding to Wall Street analyses suggesting rising recession odds, he said, ��Multiple economic forecasters have slightly raised recession probabilities, but they remain relatively modest. While the odds have increased, they are not high.��

As expected, with the Fed maintaining rates and sticking to its year-end cut projections, all three major New York stock indices rose. The Dow Jones Industrial Average climbed 383.32 points (+0.92%) to close at 41,9164.63. The S&P 500 gained 60.63 points (+1.08%) to end at 5,675.29, while the Nasdaq rose 246.67 points (+1.41%) to finish at 17,750.79.

Russell Price, Chief Economist at Ameriprise Financial, explained the market��s rally: ��Inflation expectations ticked up slightly, and GDP forecasts dipped a bit. The market was looking for anything to reduce uncertainty and didn��t interpret the Fed��s decision as adding to it.��

<Hongyong Park>