US stocks rose on Wednesday after the Federal Reserve kept its benchmark overnight interest rate unchanged in the 4.25 per cent to 4.50 per cent range, indicating that two quarter-point interest rate cuts were likely later this year, the same median forecast as three months ago. The Nasdaq Composite gained over 1.4 per cent, S&P 500 rose over one per cent and the Dow Jones Industrial Average added over 0.9 per cent.
Meanwhile, the Fed also forecast slower economic growth and higher inflation, citing risks from US President Donald Trump’s tariff policies. Officials now expect the economy to grow at a 1.7 per cent pace this year, down 0.4 percentage points from the previous projection in December. They also expect their preferred measure of inflation to stand at 2.7 per cent at the end of this year, up from the 2.5 per cent anticipated in December.
The central bank’s second monetary policy decision of 2025 comes amid stagflation risks fueled by US President Donald Trump’s tariff hikes, which escalated a global trade war. The Federal Reserve took a wait-and-see approach to an uncertain US economy, opting to leave interest rates unchanged at the close of its March meeting. Fed Chair Jerome Powell told a news conference that they are not in a hurry to adjust policy stance, and are well-positioned to wait for greater clarity.