Fed’s Big Move: Interest Rates Stay Put as Trump’s Policies Take Center Stage

XAUUSD is moving in an Ascending channel and the market has reached the higher high area of the channel

The financial world is closely watching as the Federal Reserve gears up to announce its latest monetary policy decision. While no changes to the policy rate are expected, the real intrigue lies in the Summary of Economic Projections (SEP) and Fed Chairman Jerome Powell’s comments. These elements could provide valuable insights into the central bank’s future moves and the health of the US economy.

For anyone wondering how this decision might impact the US dollar (USD) or what clues we might get about future interest rate cuts, let’s break it down in simple terms.

Will the Federal Reserve Change Interest Rates?

The general expectation is that the Federal Reserve will keep its policy rate unchanged for the second straight meeting. The last time the Fed made a move was in December when it cut interest rates by 25 basis points (bps). Since then, the central bank has taken a “wait-and-see” approach, closely monitoring inflation, job data, and economic growth.

According to market analysts, there is almost no chance of a rate cut in March. However, some investors believe a rate cut could happen in May, with a roughly 30% probability. That means that while the Fed’s decision itself may not be a surprise, the real action will come from the economic projections and Powell’s press conference.

What Do The Economic Projections Tell Us?

Every few months, the Fed updates its economic forecasts, known as the dot plot. This report gives an idea of what policymakers expect for economic growth, inflation, and future interest rates.

EURUSD is moving in a descending channel and the market has reached the lower high area of the channel

In December, the dot plot showed that the Fed planned to cut rates by 50 bps in 2025, while expecting:

Economic Growth (GDP) to hit 2.1%
Inflation (PCE index) to be 2.5% by year-end

If these numbers change, it could send strong signals about what the Fed is thinking.

If the Fed expects a bigger rate cut (75 bps instead of 50 bps), it could mean they are more worried about the economy slowing down. This could weaken the US dollar.
If the Fed signals fewer rate cuts than expected (only 25 bps), it could make the USD stronger since it suggests the economy is in better shape than feared.

USDCAD is moving into the Symmetrical Triangle

Why Does This Matter for the US Dollar?

The Fed’s decision impacts the strength of the US dollar, which in turn affects import prices, global trade, and even inflation. If Powell suggests that inflation is still a concern, the Fed might be hesitant to cut rates too quickly. That could keep the USD strong for a while.

On the other hand, if Powell talks more about economic slowdown risks, the market might start betting on more aggressive rate cuts, which could cause the dollar to weaken.

What Could Powell Say About the Economy?

Powell’s press conference is always the highlight of these Fed meetings. He doesn’t just announce decisions—he explains them. His tone and choice of words can make a big impact on financial markets.

Here are two possible scenarios:

If Powell downplays recession concerns and focuses on inflation risks, the dollar could stay strong. This would mean the Fed is in no hurry to cut rates.
If Powell acknowledges economic weakness, investors might assume that rate cuts will come sooner rather than later, leading to a weaker dollar.

There’s also the political factor—with upcoming elections, policies from President Joe Biden’s administration could influence how Powell frames his message. If new tariffs or trade policies are introduced, they could impact inflation and future Fed decisions.

What Time Will the Federal Reserve Announce Its Decision?

The Fed will release its decision on Wednesday at 18:00 GMT, followed by Powell’s press conference at 18:30 GMT.

This event is closely watched by investors, economists, and policymakers worldwide. Not only does it impact the US economy, but it also has ripple effects on global markets.

GBPUSD is moving in an Ascending channel and the market has reached the higher low area of the channel

What Could Happen Next?

While no rate cut is expected immediately, here’s what could come next:

If inflation remains high, the Fed might keep rates steady for longer, delaying cuts until late 2025.
If economic data weakens, the Fed could act sooner to support growth.
If the job market stays strong, the Fed might feel less pressure to cut rates quickly.

Investors, businesses, and everyday people will all be watching closely. Interest rates impact borrowing costs, mortgages, credit card rates, and even job opportunities.

For now, the biggest takeaway is that the Fed’s decision isn’t just about what happens this week—it’s about what’s coming in the months ahead.

Final Thoughts

The Federal Reserve’s meeting might not bring an immediate change in interest rates, but it will set the stage for what’s to come. Powell’s words and the economic forecasts will provide key hints about future rate cuts, inflation, and economic growth.

For the US dollar, it all depends on how the Fed balances inflation risks with concerns about a slowdown. Whether you’re an investor, a business owner, or just someone trying to make sense of the economy, this meeting is worth paying attention to.

Stay tuned—because what the Fed decides now will shape the economy for months to come!