March 19 (UPI) — The U.S. Federal Reserve on Wednesday held interest rates steady amid recession fears.
“If the economy remains strong, and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer,” Fed Chair Jerome Powell said Wednesday.
The Fed’s Open Market Committee kept its borrowing rate targeted in the range of 4.25%-4.5% since about December. Fed officials added another half percentage point cut could be seen through the year.
“If the labor market were to weaken unexpectedly, or inflation were to fall more quickly than anticipated, we can ease policy accordingly,” Powell said.
President Donald Trump has been critical of the Federal Reserve, urging rates to be cut.
The CME Group’s Fed Watch tool that tracks target interest rate probabilities among interest rate traders showed a 99% probability of no interest rate change Wednesday.
In the morning, stocks edged with the S&P 500 rising 39 points, or 0.7%, to 5,653, as Dow Jones Industrial Average rose 0.5% and Nasdaq Composite increased 1%.
Prices were much higher after the close of the markets at 4 p.m., about two hours after the fed announcement.
The DJIA climbed 383.32 points, or 0.92%, and closed at 41,964.63. The S&P 500 went up 1.08% to end at 5,675.29, and the Nasdaq Composite rose 1.41% to settle at 17,750.79.
The records are DJIA at 45,014.04 on Dec. 4, NASDAQ at 20,173.89 on Dec. 16 and S&P 6,117.76 at on Feb. 19.
A drop of 10% is considered a “correction.”
Gold was up $18.20 to $3,059.70, a record.
The Fed didn’t change rates at its previous meeting on Jan. 29. The Fed had decreased the rate three times since September 2024, when it dropped a half point, for a full percentage point.
The Federal Reserve has sought to keep inflation at 2%, which is down sharply from the 40-year peak it hit in mid-2022 when it was 9.1%. The Federal Reserve rate then was 1.2%.
The rate was 2.8% for the 12 months ending in February, compared with the previous month’s 3.0%.
“The most important thing to recognize is that the information that came across was almost exactly what people had expected,” Michael Green, chief strategist at Simplify Asset Management, told CNBC. “We’ve now had two consecutive summers in which the inflation has been much weaker than expected, and two consecutive winter and spring periods in which inflation has been higher. That suggests that there is residual seasonality that is not being properly captured.”
Meanwhile, Trump administration tariffs on its allies such as Mexico, Canada, the European Union and China set off a response of retaliatory tariffs on steel and aluminum from the EU and Canada and threw an economic wrench in the U.S. economy. China has also retaliated with higher tariffs against American goods as consumer prices continue to rise in the United States.
“It can be the case that it’s appropriate sometimes to look through inflation if it’s going to go away quickly without action by us — if it’s transitory,” the Fed chair pointed out. “And that can be the case in the case of tariff inflation. I think that would depend on the tariff inflation moving through fairly quickly.”
Tariffs created a heavy loss week for stocks last week with the DJIA seeing its steepest one-week decline since March 2023.
“I think it may be one or zero cuts this year, particularly if the tariffs stick. I don’t think they’re going to try and bail out the economy by cutting rates, because they know that if they stoke inflation, they’re going to have to go back and start all over again,” Allianz Trade North America senior economist Dan Smith said.
On Feb. 11, Powell said on Capitol Hill that the Fed was in “no hurry” to change interest rates.
Powell said the economy remained strong and with interest rate policy already “significantly less restrictive” there need be no hurry on rate adjustments.
However, the stock market plummeted on March 10, just a day after President Donald Trump said during an interview that the United States could face a recession.
Treasury Secretary Scott Bessent added to the recession fears on March 10 when he said he could not guarantee that the U.S. would not go into recession.
Twenty-three Nobel prize-winning economists saw this coming when they signed a letter in October 2024 that said Trump economic policies would be inflationary.
They said economic policies advocated by Vice President Kamala Harris would result in stronger economic performance.
Trump polices “including high tariffs even on goods from our friends and allies and regressive tax cuts for corporations and individuals, will lead to higher prices, larger deficits, and greater inequality,” the economists wrote.