Washington: The U.S. Federal Reserve announced on Wednesday that it would keep its benchmark interest rate unchanged, while indicating the possibility of two rate cuts within the year. This decision comes as the central bank carefully evaluates the impact of President Donald Trump's tariff policies and other factors contributing to economic instability.
According to Yonhap News Agency, following the two-day Federal Open Market Committee (FOMC) meeting, the Federal Reserve declared its decision to maintain the rate within the 4.25 to 4.50 percent range. This pause follows previous reductions that included quarter-percentage-point cuts in December and November, alongside a 50-basis-point cut in September.
The FOMC's latest median economic projections suggest that the federal funds rate will decrease to 3.9 percent by the end of the year, followed by a further reduction to 3.4 percent next year, and eventually to 3.1 percent in 2027. These projections align with the December forecast, which also predicted a rate cut to 3.9 percent this year, outlining two cuts for 2025.
Additionally, the updated median projections reveal that Personal Consumption Expenditures inflation could reach 2.7 percent by the end of the year, surpassing the December forecast of 2.5 percent. This week's decision on the rate maintains a gap of up to 1.75 percentage points between the key rates of South Korea and the United States.