Fed Holds Rates Steady, Dims Economic Outlook

Summary

WSJ What’s News: Detailed Summary of "Fed Holds Rates Steady, Dims Economic Outlook"

Release Date: March 19, 2025

The Wall Street Journal's "What’s News" podcast episode titled "Fed Holds Rates Steady, Dims Economic Outlook" delivered a comprehensive analysis of pivotal economic developments, corporate earnings, and significant geopolitical events impacting global markets. Hosted by Alex Zosela, the episode delved into the Federal Reserve's latest policy decisions, General Mills' financial performance, strategic moves in the Panama Canal, and ongoing negotiations between Columbia University and the Trump administration. Below is a detailed summary of the key discussions, insights, and conclusions from the episode.

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1. Federal Reserve's Monetary Policy Decision

Federal Reserve Holds Interest Rates Steady

The episode opened with Alex Zosela reporting on the Federal Reserve's recent policy meeting, where the central bank decided to maintain the benchmark federal funds rate at approximately 4.3%. This "wait and see" approach reflects the Fed's assessment of how the Trump administration's policy changes might influence the broader economic landscape.

Fed Chair Jerome Powell's Commentary

Post-meeting, Fed Chair Jerome Powell provided insights into the current economic conditions:

"Growth looks like it's maybe moderating a bit, consumer spending moderating a bit, but still at a solid pace. Unemployment's 4.1% job creation most recently has been at a healthy level. Inflation has started to move up now, we think partly in response to tariffs, and there may be a delay in further progress over the course of this year. So that's the hard data. Overall, it's a solid picture."
— Jerome Powell [01:51]

Powell highlighted that while economic growth and consumer spending are gradually slowing, the economy remains robust. However, inflationary pressures are rising, partly due to increased tariffs, potentially delaying progress in reducing inflation.

Greg Ip's Analysis on Fed's Outlook

Joining the discussion, WSJ Chief Economics Commentator Greg Ip provided a nuanced interpretation of Powell's statements:

"The main takeaway from what Chair Powell had to say is that not a lot in the economic outlook with respect to either economic growth or inflation has changed. Notwithstanding the fact that the headlines and the conversation have been jam packed with policy noise for months now about tariffs about government spending cuts and so on."
— Greg Ip [02:33]

Ip emphasized that despite ongoing policy debates surrounding tariffs and government spending, the Fed's fundamental outlook on economic growth and inflation remains largely unchanged. He noted that the steady stance of the Fed offers reassurance to the public and investors amidst a backdrop of policy uncertainty.

Revised Economic Projections

The Fed also updated its economic projections, lowering the growth forecast for the year to 1.7% from the previous 2.1% and slightly increasing the inflation expectation by a quarter percentage point. Ip elaborated that this adjustment likely accounts for the observed economic softness in the recent quarter and anticipates that tariffs will create a temporary uptick in inflation without causing a long-term surge that would necessitate further interest rate hikes.

Impact on Stock Markets

The decision to hold rates steady was well-received by investors, contributing to a notable rally in the stock markets:

• Dow Jones Industrial Average: Increased by approximately 0.9%
• S&P 500 Index: Rose by about 1.1%
• Nasdaq Composite: Advanced by roughly 1.4%

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2. General Mills’ Earnings Report

Slowed Consumer Spending on Snacks

The podcast transitioned to discuss General Mills' fiscal third-quarter earnings, which fell below internal expectations. Alex Zosela introduced WSJ reporter Jesse Newman's analysis:

"The biggest thing that they show us is that consumers are pulling back on their snack purchases. And this isn't the first time we've seen it. Big food companies have been saying for a while now that they are seeing a slowdown in snacks."
— Jesse Newman [05:21]

Newman highlighted that General Mills' revised guidance predicts a 1.5% to 2% decline in organic sales for the fiscal year. This downturn is attributed to weakened consumer sentiment and a heightened focus on value, compelling companies to prioritize creating tangible value for cost-conscious shoppers.

Economic Uncertainty's Impact on Corporate Planning

Further discussing the broader economic implications, Newman explained:

"Food companies in general are just like all businesses across the US really just trying to ride the wave of this uncertainty. It's hard to plan when you don't know exactly what the future is going to bring."
— Jesse Newman [06:09]

This uncertainty, stemming from fluctuating economic indicators and policy changes, hampers companies' ability to strategize effectively, leading them to refrain from incorporating new tariffs or unforeseen costs into their financial forecasts.

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3. Strategic Developments in the Panama Canal

US Acquisition of Panama Canal Ports

Alex Zosela reported on a significant geopolitical development where US investors have struck a deal to purchase ports on both ends of the Panama Canal from the Hong Kong-based conglomerate CK Hutchison. President Trump hailed the transaction as a strategic triumph over Chinese influence in a critical American interest zone.

Chinese Leader Xi Jinping's Response

However, the deal has not been well-received by Chinese leadership. WSJ Chief China Correspondent Ling Ling Wei provided a detailed perspective:

"The deal is a huge loss of faith for Xi Jinping, China's authoritarian leader. Our reporting shows that Xi originally planned to use the issues over Chinese interests in the Panama Canal as a bargaining trip in negotiations with the Trump administration, but the deal basically pulled rock out from under him even before any negotiations started."
— Ling Ling Wei [09:12]

Wei explained that Xi Jinping had intended to leverage the Panama Canal assets as a negotiation tool in dealing with the Trump administration. The swift closure of the deal undermines Beijing's strategic objectives, prompting Chinese authorities to consider measures to counteract the transaction.

Potential Chinese Retaliation

Despite the strong displeasure, Ling Ling Wei noted the limitations Beijing faces in disrupting the deal:

"Despite the top leaders anger, he doesn't really have a very simple way to talk torpedo the deal because the assets to be sold are all outside mainland China and Hong Kong."
— Ling Ling Wei [10:16]

Nonetheless, Wei cautioned that China's response could intensify geopolitical tensions, given the broader context of US-China competition for global influence. Potential avenues for retaliation include leveraging economic dependencies and exerting pressure on American companies operating within China.

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4. Columbia University’s Negotiations with the Trump Administration

Potential Yielding to Federal Demands

The podcast also covered an exclusive report on Columbia University's negotiations with the Trump administration. Facing the withdrawal of $400 million in federal funding due to allegations of campus anti-Semitism, the university is reportedly nearing a concession to the administration's demands. These demands include:

• Banning Masks: Restricting mask usage on campus.
• Empowering Campus Police: Granting greater authority to campus law enforcement.
• Academic Restructuring: Placing the Department of Middle East, South Asian, and African Studies under academic receivership, reducing faculty control.

Zosela emphasized that compliance with these demands is not guaranteed to restore federal funds, as ongoing discussions within the university's board of trustees indicate lingering disagreements and potential obstacles.

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5. Additional Global News Highlights

Ukrainian-Russian Ceasefire Agreement

In the realm of international affairs, Ukrainian President Volodymyr Zelenskyy reached a partial ceasefire agreement with Russia aimed at protecting energy infrastructure in both nations. This accord, facilitated during a phone call with President Trump, includes provisions to expand the deal in forthcoming talks in Saudi Arabia. Additionally, Trump pledged to enhance Ukraine's defense capabilities by providing more U.S. air defense systems and considering the acquisition of Ukrainian power plants to safeguard energy infrastructure.

Political Developments in Turkey

The episode also touched upon significant political upheaval in Turkey, where authorities detained Istanbul Mayor Ekrem Imamoglu and numerous others associated with the main opposition party. Imamoglu, a leading contender to challenge President Recep Tayyip Erdogan in upcoming elections, faces arrest amid increasing governmental consolidation of power. These actions signal potential constraints on democratic processes within the NATO-member nation, raising concerns about Turkey's political future.

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Conclusion

The "Fed Holds Rates Steady, Dims Economic Outlook" episode of WSJ's "What’s News" provided listeners with an in-depth exploration of critical economic policies, corporate performance, and international geopolitical strategies. By integrating expert analyses from Greg Ip and Ling Ling Wei, the podcast offered nuanced perspectives on the implications of the Federal Reserve's decisions, consumer behavior trends affecting major corporations like General Mills, and the strategic maneuvering within the Panama Canal dealings that underscore the intensifying US-China rivalry. Additionally, the episode shed light on the pressures faced by educational institutions like Columbia University amid federal scrutiny and highlighted significant political shifts in countries such as Ukraine and Turkey. For those seeking to stay informed on the latest developments that shape global markets and political landscapes, this episode serves as an essential resource.

Transcript

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[Alex Zosela]

The Fed holds rates steady as it dims the economic outlook. Plus, Chinese leader Xi Jinping is angry about a deal for the control of two Panama Canal ports that Trump counts as a win.

[Ling Ling Wei]

Xi originally planned to use the issues over Chinese interests in the Panama Canal as a bargaining trip in negotiations with the Trump administration. But the deal based basically pulled Rock out from under him even before any negotiations started.

[Alex Zosela]

And Columbia University is getting close to yielding to President Trump's demands in an effort to regain its federal funding. It's Wednesday, March 19th. I'm Alex Zosale for the Wall Street Journal. This is the PM edition of what's the top headlines and business stories that move the world today. The Federal Reserve extended its wait and see posture on interest rates while marking up its forecast for inflation and revising down its outlook for growth this year. At its policy meeting today, the central bank held steady its benchmark federal funds rate at around 4.3% as the Fed assesses how policy changes by the Trump administration could reshape the economic outlook. In his comments after the meeting, Fed Chair Jerome Powell said that progress on inflation could be delayed this year.

[Jerome Powell]

Growth looks like it's maybe moderating a bit, consumer spending moderating a bit, but still at a solid pace. Unemployment's 4.1% job creation most recently has been at a healthy level. Inflation has started to move up now, we think partly in response to tariffs, and there may be a delay in further progress over the course of this year. So that's the hard data. Overall, it's a solid picture.

[Alex Zosela]

The Fed still expects two rate cuts in 2025, though Powell said that the bank is in no rush to cut interest rates as it waits more certainty on the path of the economy. I'm joined now by WSJ chief economics commentator Greg ip. So Greg, what do we get out of Powell's comments?

[Greg Ip]

The main takeaway from what Chair Powell had to say is that not a lot in the economic outlook with respect to either economic growth or inflation has changed. Notwithstanding the fact that the headlines and the conversation have been jam packed with policy noise for months now about tariffs about government spending cuts and so on. In some sense, the public and investors were relieved to hear that, despite all the sort of strum and drang going on in policy circles is that at least as far as the central bank is concerned, steady as she goes.

[Alex Zosela]

I'm particularly interested in the quarterly projection that the Fed announced today. This was the first one for this year and the first one under President Trump. What does it show about what's to come?

[Greg Ip]

Well, they lowered their economic growth projection for this year to 1.7% from 2.1%. Now, that's obviously in the wrong direction, but I'm not sure how much to read into that because a lot of that might just reflect some of the strange weakness we've seen in the quarter so far. They also raised their expectations for inflation this year a little bit by about a quarter of a percentage point. And Chair Powell in his press conference did indicate that that reflected some expected pass through to consumer prices from higher tariffs. But if you look at the projections for the following year, those haven't really changed. So effectively what they're saying is we think tariffs will generate this one off bump up in the inflation rate, but not a persistent increase in inflation, which is the kind of thing that they would worry about and might have to respond to by raising interest rates. The press corps obviously wanted to get him to talk expansively about all the stuff Trump's been doing on tariffs and on spending, spending cuts and so on. And Powell, who tries very hard to maintain the apolitical, nonpartisan reputation and mission of the Fed, he wasn't helping out on that front at all. He was batting down those questions left, right and center.

[Alex Zosela]

That was WSJ chief economics commentator Greg ip. Thank you, Greg.

[Greg Ip]

Thanks for having me.

[Alex Zosela]

The Fed's forecast for rate cuts wasn't as hawkish as many investors feared, which added fuel to today's stock market rally. Major U.S. indexes rose. The Dow went up about 0.9%. The S&P 500 ticked about 1.1% higher, and the Nasdaq advanced about 1.4%, reporting its third quarter earnings. Today. General Mills updated its guidance for organic sales, saying it expects they'll fall by one and a half to 2% this fiscal year. The company, which makes snacks and other foods like Cheerios cereal and Pillsbury Dough, said that results for its fiscal third quarter, which ended February 23, were below internal expectations. I'm joined now by Jesse Newman, who covers food for the Journal. So, Jesse, what do General Mills earnings tell us about the dynamics at play in the US Market.

[Jesse Newman]

The biggest thing that they show us is that consumers are pulling back on their snack purchases. And this isn't the first time we've seen it. Big food companies have been saying for a while now that they are seeing a slowdown in snacks. And General Mills really reiterated this today. And they talked a lot about consumers and how consumer sentiment just really hasn't improved the way they thought it would at the beginning of their fiscal year. So at the beginning of the fiscal year they thought, you know, consumer sentiment was going to get a lot better. They said that hasn't happened. And in fact, shoppers are still very, very focused on value. And so it's up to them to create that value for consumers.

[Alex Zosela]

The company said that its forecast doesn't incorporate any new tariffs. What does that show about how economic uncertainty is affecting companies ability to plan ahead?

[Jesse Newman]

Food companies in general are just like all businesses across the US really just trying to ride the wave of this uncertainty. It's hard to plan when you don't know exactly what the future is going to bring. So they don't know enough to price anything in at this point. But there's just a lot of uncertainty out there when it comes to the broader economic conditions.

[Alex Zosela]

That was WSJ reporter Jesse Newman. Thank you, Jesse.

[Jesse Newman]

Thank you.

[Alex Zosela]

We're exclusively reporting that Columbia University is getting close to yielding to President Trump's demands in negotiations to restore $400 million in federal funding. That's according to people close to the discussions. The government canceled the grants and contracts over campus anti Semitism allegations. Earlier this month it made nine far reaching demands, which include banning masks, empowering campus police and putting the school's Department of Middle East, South Asian and African Studies under academic receivers, which means it would no longer be controlled by the faculty. Columbia has until tomorrow to respond to the administration. Agreeing to the demands doesn't guarantee the federal funds will come back. Discussions on the board of trustees are still fluid with sticking points and could turn in a different direction before tomorrow. Congress is working on a budget and cuts to Medicaid are on the table. The program is mainly for low income Americans, but deep cuts could affect state budgets and health care more broadly. What questions do you have? Send a voice memo to wnpodsj.com or leave a voicemail with your name and location at 212-416-4328. We might use it on the show. Coming up, why China's leader Xi Jinping is unhappy with the Hong Kong company's plan to sell Panama Canal ports to a U s led group. That's after the break.

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[Alex Zosela]

Earlier this month, US investors struck a deal to buy ports on either side of the Panama Canal from Hong Kong based CK Hutchison. Trump celebrated the deal as a victory over Chinese interests in America's backyard. One person who is not happy about it? Chinese leader Xi Jinping. According to people familiar with the matter, several Chinese authorities have been told to study the deal to see what Beijing can do to hinder it. For more, I'm joined by WSJ Chief China correspondent Ling Ling Wei. So Ling Ling, Panama actually operates the canal, so why are these ports on either end of it such a big deal?

[Ling Ling Wei]

The deal is a huge loss of faith for Xi Jinping, China's authoritarian leader. Our reporting shows that Xi originally planned to use the issues over Chinese interests in the Panama Canal as a bargaining trip in negotiations with the Trump administration, but the deal basically pulled rock out from under him even before any negotiations started. On the other hand, as you pointed out, President Trump quickly celebrated this deal as a victory over Chinese interests in America's backyard. So round one in this US China battle for global influence, Beijing suffered a setback. In addition, if the deal does get finalized, China is worried that Chinese ships might face restrictions, surcharges and sanctions.

[Alex Zosela]

Can Beijing do anything about this?

[Ling Ling Wei]

Despite the top leaders anger, he doesn't really have a very simple way to talk torpedo the deal because the assets to be sold are all outside mainland China and Hong Kong. And at this moment we have told by both parties the deal that they are still very confident that it can be completed, but for sure the pressure is mounting. The question now a lot of people are asking is whether or not China or the Hong Kong government would try to block the deal for national security reasons.

[Alex Zosela]

So far, China has been pretty restrained in how it's retaliated against Trump's new tariffs on China. How does this new development potentially affect that?

[Ling Ling Wei]

Geopolitical competition between China and the United States is definitely heating up. The fact of the matter is China's economy is not really doing that well. So economically speaking The United States does have certain leverage over China. However, Beijing's anger over this Hutchinson deal, it's one example of intensifying competition between those two powers. The strong reaction from Beijing shows that they are going to fight back at every turn. They're not going to just sit idle and do nothing. And they do have levers to pull, including those over American companies operating in China and China's control of critical minerals. So no doubt it will be a roller coaster ride ahead.

[Alex Zosela]

That was chief China correspondent Ling Ling Wei. Thank you, Ling Ling.

[Ling Ling Wei]

Thank you for having me.

[Alex Zosela]

And if you want more background on the deal and the dilemma the US Faces in trying to respond to China's global campaign to gain influence through infrastructure, check out our special series, Building Influence. We've got a link to the full series in the show. Notes in world news During a phone call with President Trump today, Ukrainian President Volodymyr Zelenskyy agreed to a partial ceasefire deal with Russia that would protect energy infrastructure in both countries. Zelenskyy also agreed to try to broaden the deal in further talks in Saudi Arabia in the coming days, Trump promised to try to fulfill a request from zelenskyy for more U.S. air defense systems to protect Ukrainian civilians and suggested that the US Acquire some of Ukraine's power plants, including nuclear, to run and protect Ukraine's energy infrastructure. And Turkish authorities have moved against the country's main opposition party. Istanbul Mayor Ekrem Imamolu, who's widely viewed as the most likely person to have a chance of Unseating Recep Tayyip Erdogan in a new election, was detained today along with dozens of other people. The detentions could have far reaching implications for the future of democracy in the strategically located North Atlantic Treaty Organization member where Erdogan has amassed enormous authority. And that's what's news for this Wednesday afternoon. Today's show is produced by Anthony Banci and Pierre Bienname with supervising producer Michael Kosmides. I'm Alex Zosola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.