Powell’s Remarks Scrutinized as Fed Set to Hold Rates Steady.

Lean Wei Ren.

Written on 19th March 2025.

Published on 21st March 2025.

The Federal Reserve is expected to keep interest rates steady when it meets this Wednesday, giving officials more time to assess the impact of President Donald Trump’s policies on the economy.

The big question?

Whether ongoing inflation pressures and slower economic growth will change their plans.

Trade War & Inflation Worries

Trump’s new tariffs (import taxes) have led to retaliation from other countries, making everything from groceries to gadgets more expensive.

This uncertainty has hurt consumer confidence, leaving many Americans worried about rising costs. Since some of these tariffs were announced and then delayed, it’s unclear how much of an effect they’ll really have.

Because of this uncertainty, Fed officials are expected to take a “wait-and-see” approach before deciding when to cut rates.

KPMG Chief Economist Diane Swonk says:

“There’s going to be a lot of different opinions on rate cuts because of all the uncertainty.”

What’s Changing?

• The economy has slowed since the Fed last shared its projections in December:

• Growth is cooling

• Consumer confidence is down

• Stock prices have dropped

Some experts believe the Fed will lower its growth forecasts and slightly increase inflation estimates, meaning rate cuts could be delayed.

BNP Paribas Analyst Guneet Dhingra says:

“The Fed will likely focus more on inflation than the economy. The real question is: How bad will the slowdown be?”

Will the Fed Cut Rates This Year?

Back in December, the Fed predicted two rate cuts in 2025. Many economists think they’ll stick with that plan, but some expect fewer cuts.

Bloomberg Economics says:

• The Fed might only cut rates once or twice this year (instead of twice)

• Powell will likely stay neutral about Trump’s policies\

• If the economy slows down, the Fed could be too slow to react

What This Means for Beginner Investors

No Rate Cuts Yet = Higher Loan Costs

If you have a credit card balance or a loan, interest rates will stay high for now. If you’re investing, higher rates can slow down business growth and stock market gains.

Inflation Is Still a Problem

Prices are rising, but the Fed still isn’t convinced inflation is under control. If inflation stays high, rate cuts may take longer to arrive.

Stocks Might Stay Volatile

The S&P 500 recently dropped 10%, and bond yields are down. Powell’s comments on Wednesday could move markets even more, depending on how investors react.

Powell’s Press Conference – What to Watch

Expect tough questions for Fed Chair Jerome Powell:

• Are tariffs causing lasting inflation

• does he see falling stock prices?

• Is the Fed worried about rising unemployment?

Will the Fed Change Its Balance Sheet Policy?

The Fed has been shrinking its balance sheet (selling off bonds) to keep inflation under control. But with the U.S. debt ceiling crisis looming, they may slow down or stop this process to avoid financial market disruptions.

Key Takeaway

The Fed isn’t in a rush to cut rates, and Powell will likely play it safe in his press conference. But for investors, the biggest risk is that the Fed may keep rates too high for too long, potentially hurting the economy.

~ Beyond The World