Fed Holds Rates, Cuts Growth Forecast, Hints at Two Cuts This Year

The U.S. Federal Reserve (Fed) announced on the 19th Eastern Time (early morning of the 20th in Taiwan) that it would maintain the target range of the federal funds rate at 4.25% to 4.50%, marking the second consecutive time of keeping its policy unchanged, and still hinted that it may cut interest rates twice this year.

According to the interest rate dot plot released by the Fed after the policy meeting, officials' median forecast for the interest rate location in 2025 was 3.9%, the same as the 3.9% forecast in December last year.

The median forecast for interest rates in 2026 also remained at 3.4%, the same as the previous forecast. Looking longer term, policymakers see rates at 3.1 percent in 2027, also unchanged from their last forecast.

In terms of gross domestic product (GDP), it is estimated to grow by 1.7% this year, 0.4 percentage points lower than the previous forecast of 2.1%. The median economic growth rate in 2026 is 1.8%, which is also lower than the previous forecast of 2.0%.

The inflation rate forecast was revised upward, with the annual core PCE inflation rate for this year estimated at 2.7%, higher than the 2.5% forecast in December last year, and next year's rate revised up from 2.1% to 2.2%. The median unemployment rate forecast for this year is 4.4% and 4.3% next year.

U.S. stocks rebounded and closed higher, with the Dow Jones Industrial Average closing up 383.32 points, or 0.92%, at 41,964.63. The S&P 500 rose 60.63 points, or 1.08%, to close at 5,675.29, and the Nasdaq Composite rose 246.67 points, or 1.41%, to close at 17,750.79.