New York Fed President John Williams highlighted the elevated level of uncertainty facing the US economy. Speaking at a public event, Williams acknowledged that “it’s hard to know with any precision how the economy will evolve,” pointing to a wide range of potential scenarios shaped by fiscal and trade policy shifts, geopolitical risks, and other external developments.

Williams noted that both hard economic data and forward-looking indicators have been giving mixed signals. He added that the recent surge in policy uncertainty measures.

Despite the murky backdrop, he defended Fed’s current stance, describing the 4.25% to 4.5% policy rate range as “modestly restrictive” and “entirely appropriate.” With inflation still running slightly above target and labor markets remaining solid, there appears to be little urgency to shift course in the near term.

Chicago Fed President Austan Goolsbee struck a cautious but balanced tone in his latest remarks, saying Fed should “wait to see some of these things get cleared up” given the high degree of policy uncertainty.

Speaking to CNBC, he noted a shift in tone among business and civic leaders in recent weeks, highlighting growing “anxiety” and delayed capital spending decisions as companies weigh the impact of tariffs and other fiscal policy developments.

Despite the cautious near-term stance, Goolsbee reaffirmed his longer-term view that interest rates are likely to be lower 12 to 18 months from now.

While the Fed may not be in a rush to act immediately, he emphasized the importance of continued progress on inflation as a key condition for future easing.

As widely expected, FOMC kept interest rates steady at 4.25-4.50%. At the same time, Fed announced a key shift in its quantitative tightening strategy, stating that beginning in April, it will slow the pace of balance sheet reduction from USD 25B to USD 5B.

In its accompanying statement, Fed acknowledged that recent economic data continues to indicate “solid” expansion, with “low” unemployment and “solid” labor market conditions. Meanwhile, Fed noted that inflation remains “somewhat elevated”, reinforcing the need for cautious policymaking.

The updated economic projections showed no change in Fed’s rate-cut outlook, with the median federal funds rate projection still pointing to just two cuts this year, leaving rates at 3.9% by the end of 2025. Looking further ahead, Fed continues to see rates at 3.4% by the end of 2026 and 3.1% by the end of 2027

Fed’s GDP growth forecasts were revised downward, reflecting growing concerns over economic headwinds. The US economy is now expected to grow by just 1.7% in 2025, down from 2.1% in the previous forecast, while 2026 and 2027 growth projections were also slightly trimmed to 1.8%.

Meanwhile, core PCE inflation projections for 2025 were revised higher, from 2.5% to 2.8%, suggesting that price pressures may prove more persistent than previously anticipated. However, core inflation forecasts for 2026 and 2027 remained unchanged at 2.2% and 2.0%, respectively, signaling confidence that inflation will gradually trend back toward the 2% target.

Full FOMC statement here.

Full Fed SEP here.