What impact will tariffs have on inflation and interest rates this year

The Federal Reserve maintains its benchmark interest rate while projecting two potential rate cuts within the year, despite persistent inflation concerns. Economic growth forecasts decrease to 1.7% for 2025, and inflation expectations rise to 2.7%, above the target of 2%. Eight Federal officials express caution regarding rate reductions. Fed Chair Jerome Powell links tariff impacts from the previous administration to inflation and warns that this could hinder progress toward price stability. Investor sentiment appears positive, evidenced by an increase in the S&P 500 index. Concerns grow over potential job losses as the unemployment rate may rise to 4.4%. The Fed's interest rate holds steady at approximately 4.3%, while it adjusts Treasury holdings to reduce maturing amounts from $25 billion to $5 billion monthly, aiming to support lower long-term Treasury interest rates. Consumer behavior shows increasing caution, as indicated by modest retail sales growth following a previous decline.

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