At its March meeting, the US Federal Reserve Board (Fed) held its federal funds rate steady. The decision was widely expected by markets, with inflation proving sticky above the Fed’s 2% target and relatively solid economic growth. The Fed updated its projections for 2025, noting that tariffs could weigh on economic conditions. New policies have created an uncertain outlook for the world’s largest economies. Here’s a deeper look at the Fed’s rate decision.

• The Fed kept its federal funds rate at a target range of 4.25%–4.50%. A Bloomberg survey showed economists were expecting the Fed to hold steady. This was the Fed’s second straight hold after lowering rates three times in 2024.
• New policies and trade tensions are weighing on the Fed’s outlook for the US economy. The Fed downwardly revised its projection for US economic growth this year to 1.7% from 2.1%. Conversely, the Fed revised higher its expectations for inflation this year.
• Fed officials expect to lower interest rates by 50 basis points this year. The Fed will have to carefully navigate through its outlook for elevated inflation combined with softer economic growth.
• The Bank of Japan (BoJ) announced its interest-rate decision on Tuesday night, electing to hold steady at 0.50%. Inflationary pressures remain elevated in Japan. The BoJ expressed concern about the health of Japan’s economy amid global trade tensions.

Central banks are carefully considering their monetary policy decisions amid heightened concerns for a slowdown in global economic activity. Much of the focus has shifted to how tariffs may impact inflation and the economy. It is the same for the Fed, which is expecting extensive tariffs to hinder growth. The Bank of Canada lowered interest rates at its March meeting last week, seeking to help support consumers and businesses as tariffs take effect.

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