The Federal Reserve left interest rates unchanged on Wednesday while announcing a slower pace of balance sheet reduction.
Fed officials raised their year-end inflation forecast to 2.7%, up from 2.5% in December, even as they projected slower economic growth. Officials cited several factors contributing to higher inflation expectations, including the potential impact of proposed tariffs from the Trump administration.
Chair Jerome Powell highlighted an unusually high degree of uncertainty around the outlook, noting that economic and policy risks could shift the path of both inflation and growth. The dollar has weakened about 6% against the euro since mid-January amid concerns over trade policy, and market participants are likely to remain cautious until first-quarter GDP data provide clearer signals.
Internationally, the Turkish lira fell to record lows after authorities detained a leading opposition figure, fueling political and financial market uncertainty. At the same time, the Japanese yen strengthened after the Bank of Japan elected to keep its policy rate unchanged, prompting renewed attention on global currency and monetary policy developments.