US Central Bank Holds Interest Rates Steady, Projects Growth Slowdown

US Federal Reserve Chair Jerome Powell speaks at a press conference, following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington, D.C., US, March 19, 2025. REUTERS/Nathan Howard
US Federal Reserve Chair Jerome Powell speaks at a press conference, following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington, D.C., US, March 19, 2025. REUTERS/Nathan Howard
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US Central Bank Holds Interest Rates Steady, Projects Growth Slowdown

US Federal Reserve Chair Jerome Powell speaks at a press conference, following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington, D.C., US, March 19, 2025. REUTERS/Nathan Howard
US Federal Reserve Chair Jerome Powell speaks at a press conference, following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington, D.C., US, March 19, 2025. REUTERS/Nathan Howard

As widely expected, the Federal Reserve’s interest rate policy meeting ending Wednesday afternoon did not bring the immediate rate cuts President Donald Trump hopes to see, as his tariffs pose a fresh threat to Fed’s efforts to curb a surge in consumer prices.

At the second of the Federal Open Market Committee’s eight 2025 meetings, concluding Wednesday, the panel announced it would keep the target federal funds rate the same at 4.25% to 4.5%, extending a pause that has been in place since January following a series of cuts in late 2024.

Federal Reserve’s Chair Jerome Powell and his colleagues in recent weeks have advocated a patient approach in which they don’t need to be in a hurry to do anything.

Along with the decision, officials updated their rate and economic projections for this year and through 2027 and altered the pace at which they are reducing bond holdings.

The Fed meeting came few days after the deterioration in sentiment and inflation expectations reported by the University of Michigan Surveys of Consumers. The uncertainty created by Trump's on- and off-again tariffs as well as an escalation in trade tensions risks derailing the economic expansion. Fears of higher prices, which drove consumers' long-term inflation expectations to levels last seen in early 1993. Over the next five years, consumers saw inflation running at 3.9% compared to 3% in December.

But even if Powell’s Committee kept its interest rates steady that doesn't mean the meeting was drama free, as the Fed released its quarterly economic projections, or dot plot, which will reveal where central bankers expect economic growth, inflation, unemployment and interest rates to settle by the end of 2025 and beyond—critical data points as early recession fears emerge.

In its post-meeting statement, the FOMC noted an elevated level of ambiguity surrounding the current climate. “Uncertainty around the economic outlook has increased,” the document stated. “The Committee is attentive to the risks to both sides of its dual mandate.”

The group downgraded its collective outlook for economic growth and gave a bump higher to its inflation projection.

Officials now see the economy accelerating at just a 1.7% pace this year, down 0.4 percentage point from the last projection in December.

They saw the unemployment rate ticking up to 4.4% by year-end, compared to 4.3% in December.

On inflation, core prices are expected to grow at a 2.8% annual pace, up 0.3 percentage point from the previous estimate.

According to the “dot plot” of officials’ rate expectations, the view is turning somewhat more hawkish on rates from December. At the previous meeting, just one participant saw no rate changes in 2025, compared with four now.

Officials at Bank of America now figure preferred measure of annual inflation will rise from 2.5% to 2.7% by year-end, above the 2.5% they predicted in December, according to their median estimate.

Economists worry the Trump tariffs could reignite inflation, particularly if the president gets more aggressive after the White House releases a global review of the tariff situation on April 2. If the Fed grows more concerned about tariff-fueled inflation, it could turn even more reluctant to cut.

CNBC channel said investors are right to be concerned about the direction the FOMC indicates, quoting Thierry Wizman, global FX and rates strategist at Macquarie.

“That worry is borne by the suspicion the Fed is not ‘in charge’ anymore, having relinquished control of macroeconomic policy to the Trump administration,” Wizman wrote.

“Given the current uncertainty, and the recent increase in inflation expectations, the Fed may find it difficult to signal three more rate cuts, or even two more. It could push one rate cut into 2026, leaving only one cut in the median ‘dot’ for 2025.”



Rise in Non-Oil Exports Strengthens Saudi Arabia’s Economic Diversification Efforts

King Abdulaziz Port in Dammam, east of Saudi Arabia (SPA) 
King Abdulaziz Port in Dammam, east of Saudi Arabia (SPA) 
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Rise in Non-Oil Exports Strengthens Saudi Arabia’s Economic Diversification Efforts

King Abdulaziz Port in Dammam, east of Saudi Arabia (SPA) 
King Abdulaziz Port in Dammam, east of Saudi Arabia (SPA) 

Saudi Arabia’s non-oil exports continued their upward trajectory, reflecting the Kingdom’s ongoing efforts to diversify its economy. According to data from the General Authority for Statistics (GASTAT), non-oil exports, including re-exports, grew by 10.7% in January, while excluding re-exports, they increased by 13.1%.

The International Trade Statistics Bulletin for January, published by GASTAT, reported a 2.4% growth in Saudi Arabia’s total merchandise exports compared to the same period last year. Meanwhile, oil exports saw a slight decline of 0.4% in January. The share of oil exports in total exports also dropped from 74.8% in January 2024 to 72.7% in January 2025.

This increase in non-oil exports is a positive indicator of the success of Saudi Arabia’s economic policies in diversifying income sources beyond oil, according to Dr. Abdullah Al-Jassar, a member of the Saudi Association for Energy Economics. Speaking to Asharq Al-Awsat, Al-Jassar emphasized that this growth did not happen by chance but was the result of a comprehensive strategy to develop the manufacturing sector, which has become a key driver of the non-oil economy. Notably, chemical industry products accounted for 23.7% of total non-oil exports.

He also highlighted that major improvements in logistics infrastructure, supported by the National Industrial Development and Logistics Program (NIDLP), have enhanced export efficiency and strengthened the connection between Saudi-made products and global markets—solidifying the Kingdom’s position as a key trade hub.

China: A Key Trade Partner

According to the latest data, China remains Saudi Arabia’s top trading partner, accounting for 15.2% of the Kingdom’s total exports, while imports from China made up 26.4% of total imports. This underscores Saudi Arabia’s strong presence in Asian trade, Al-Jassar noted.

Imports and Trade Surplus

Despite an 8.3% increase in imports, the trade surplus declined by 11.9%. However, Al-Jassar explained that this decline should be viewed within the broader context of Saudi Arabia’s structural economic transformation. The rise in imports is largely driven by an increase in production inputs that support industrial expansion rather than consumer goods.

Economic policy expert Ahmed Al-Shihri told Asharq Al-Awsat that the 10.7% growth in non-oil exports reflects the success of investments in industrial sectors, particularly the chemical industry, which accounted for 23.7% of non-oil exports. This growth indicates an improvement in production capacity and international competitiveness.

“The increase in non-oil exports is driven by enhancements in industrial infrastructure, government support for the private sector, and rising global demand for Saudi non-oil products. This shift reduces the Kingdom’s dependence on oil as the primary revenue source, making the economy more resilient to fluctuations in oil prices. Furthermore, the rise in the ratio of non-oil exports to imports—from 35.7% to 36.5%—suggests a healthier trade structure that supports long-term economic sustainability,” Al-Shihri added.

Vision 2030

Saudi Vision 2030 continues to drive non-oil sector growth through various initiatives, including enhancing local content, boosting exports, attracting foreign investments, and expanding economic and logistics zones. Al-Jassar believes that the continuation of these strategies will establish Saudi Arabia as an emerging export powerhouse in the coming years, further strengthening its global economic standing.