- The Fed left its benchmark interest rate unchanged at 4.25% to 4.5%.
- Fed Chairman Jerome Powell says tariffs are already having impacts on inflation rates.
- While U.S. consumer sentiment declines, the Fed notes that underlying economic data is still solid.
As was widely expected, the Federal Reserve left its benchmark interest rate unchanged at its March policy meeting and signaled a continued wait-and-see approach as new and pending tariff policy changes have led to widespread economic uncertainty.
After making three straight interest rate cuts to close out 2024, and reducing its benchmark rate by a cumulative 100 basis points, the Federal Reserve’s Open Market Committee once again voted to leave its overnight intra-bank lending rate at the current 4.25% to 4.5% range, where it has been since December.
At a press conference Wednesday after the Fed’s two-day meeting, Federal Reserve Chairman Jerome Powell said that while some new reporting on U.S. consumer sentiment has shown steep declines, so-called hard economic data remains in solid territory.
“Growth looks like it’s moderating a bit, consumer spending moderating a bit but still at a solid pace, unemployment is 4.1%, job creation has been at a healthy level,” Powell said. “Inflation has started to move up, we think partly in response to tariffs and there may be delay in further progress (in bringing down inflation) over the course of the year. That’s the hard data and, overall, it’s a solid picture.”
Powell also noted the challenges in parsing the level of tariff impacts when it comes to changing prices on goods and services.
“It is going to be very difficult to have a precise assessment of how much inflation is coming from tariffs,” he said. “Goods inflation moved up pretty significantly in the first few months of the year. Trying to track that back to actual tariff increases, given what was tariffed and what was not, is very, very challenging.
“The answer is clearly some of it, a good part of it, is coming from tariffs.”
Consumer sentiment declining
The latest national reading from the University of Michigan’s closely-watched Surveys of Consumers, released earlier this month, found U.S. consumer sentiment continued a downward trend in the first part of March, dropping 11% from February. And that decline is being driven, at least in part, by consumer worries over national economic policy changes.
“Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences,” Surveys of Consumers director Joanne Hsu wrote in the report. “Consumers from all three political affiliations are in agreement that the outlook has weakened since February.”
Powell said that readings on consumer sentiment don’t always match up with consumer spending patterns and while the Fed monitors the University of Michigan reports, it’s just one among many data sources. So far, Powell said, consumers' gloomy outlook isn’t showing up in their spending behaviors.
“The relationship between survey data and actual economic activity hasn’t been very tight,” Powell said. “There have been plenty of times where people are saying very downbeat things about the economy and then going out and buying a new car.
“We don’t know that that will be the case here. We will be watching very carefully for signs of weakness in the real data.”
Powell also said he understands that even as the overall rate of inflation has declined significantly in the past two years, consumers are still paying for goods and services that are, in some cases, priced dramatically higher than just a few years ago.
Here’s what Utahns say about the economy
Recent statewide polling conducted by the Deseret News in partnership with the University of Utah’s Hinckley Institute of Politics found that Utahns are having their own bouts of gloom when it comes to the national economy but are more upbeat about the state’s economic prospects as well as their household finances.
In that survey, conducted Feb. 18-25, a plurality of Utahns polled, 41%, say their personal financial situation is currently steady while 31% report things are getting worse on the personal financial front and 26% say it’s improving.
When asked, “In general, do you think Utah’s economy is on the right track or is it off on the wrong track?” 51% of respondents said the state was on the right track, 32% said wrong track and 17% weren’t sure or said they didn’t know.
But when asked the same right track/wrong track questions about the American economy, nearly half of respondents, 47%, said the country’s economy was off course, 39% believe it’s on the right track and 15% weren’t sure or didn’t know.
Utah-focused consumer sentiment tracking by the Salt Lake Chamber, in partnership with the University of Utah’s Kem C. Gardner Policy Institute, has also been reflecting a decline in consumer attitudes, though at a slower rate than national tracking.
“Economic indicators appear mixed in the early months of 2025, underscoring the uncertainty being felt about the state of the economy,” Natalie Gochnour, director of the Kem C. Gardner Policy Institute, said in a statement. “While Utah’s economy continues to be top tier among states, declining consumer sentiment, slowed job growth and concerns over federal trade policies are tempering expectations for the near future.”