The Federal Reserve has maintained the federal funds rate in the range of 4.25%-4.5% for two consecutive meetings since March 2025, in line with market expectations. This decision is based on a balanced consideration of economic resilience and inflation risks. Despite repeated pressure from Trump to lower interest rates, the Federal Reserve emphasizes its independence and insists on adjusting policies based on economic data rather than political pressure.

Balance Sheet Adjustment

Starting from April 2025, the Federal Reserve will reduce the scale of Treasury bond purchases from $25 billion per month to $5 billion, while maintaining a cap of $35 billion per month for mortgage-backed securities (MBS). This move aims to alleviate liquidity pressure in the money market and leave buffer space for potential shocks after resolving the debt ceiling.

II. Economic and Inflation Assessment

Downgrade of Economic Growth Expectations

At the March meeting, the Federal Reserve downgraded its GDP growth forecast for 2025 from 2.1% to 1.7% and for 2026 from 2.0% to 1.8%, mainly due to uncertainties in tariff policies that suppress business investment and consumer confidence. The Atlanta Fed model shows that the GDP growth expectation for the first quarter of 2025 is -1.8%, indicating short-term recession risks.