WSJ What’s News - Fed Holds Rates Steady, Dims Economic Outlook

Episode Date: March 19, 2025

P.M. Edition for Mar. 19. The Federal Reserve held interest rates steady, as expected, continuing its wait-and-see posture. WSJ chief economics commentator Greg Ip joins to discuss the central bank’s outlook for the quarter. Plus, the Journal’s chief China correspondent Lingling Wei explains why Chinese leader Xi Jinping is angry with Hong Kong-based CK Hutchison’s deal to sell ports on either side of the Panama Canal to U.S. investors. And Ukrainian President Volodymyr Zelensky agreed to a partial cease-fire with Russia on a phone call with President Trump. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Xi originally planned to use the issues over Chinese interests in the Panama Canal as a bargaining chip in negotiations with the Trump administration. But the deal basically pulled the rug out from under him even before any negotiations started. 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 Oscele for the Wall Street Journal. This is the PM edition of What's News, 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 percent 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. Growth looks like it's maybe moderating a bit, consumer spending moderating a bit, but still at a solid pace. Unemployment's 4.1 percent. 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. 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 for 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? 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 drain going on in policy circles is that at least as far as the central bank is concerned, steady as she goes.

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? 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 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 cuts and so on. And Powell, who tried 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. That was WSJ Chief Economics commentator Greg Ipp. Thank you, Greg. Thanks for having me. 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 percent, the S&P 500 ticked about 1.1 percent higher, and the Nasdaq advanced about 1.4 percent. Reporting its third quarter earnings today, General Mills updated its guidance for organic sales, saying it expects they'll fall by 1.5 to 2 percent 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 23rd, were below internal

expectations. I'm joined now by Jessi Newman, who covers food for the Journal. So Jessi, what do General Mills earnings tell us about the dynamics at play in the U.S. market? 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.

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? 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. That was WSJ reporter Jessi Newman.

Thank you, Jessi. Thank you. 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 antisemitism 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 receivership, 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 healthcare more broadly. What questions do you have?

Send a voice memo to wnpod at wsj.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 US-led group. That's after the break. 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 Lingling Wei. So Lingling, Panama actually operates the canal.

So why are these ports on either end of it such a big deal? 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 chip in negotiations with the Trump administration. But the deal basically pulled the rug 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 U.S.-China battle for global influence, Beijing suffered a setback.

suffered a setback. In addition, if the deal does get finalized, China is worried that Chinese ships might face restrictions, surcharges, and sanctions. Can Beijing do anything about this? Despite the top leader's anger, he doesn't really have a very simple way to 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. 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? 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 is 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. That was Chief China correspondent Lingling Wei. Thank you, Lingling.

Thank you for having me. And you could read Lingling's story on wsj.com. We'll leave a link in the show notes. In world news, during a phone call with President Trump today, Ukrainian President Volodymyr Zelensky agreed to a partial ceasefire deal with Russia that would protect energy infrastructure in both countries. Zelensky 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 Zelensky for more U.S. air defense systems to protect Ukrainian civilians, and suggested that the U.S. 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 İmamoğlu, 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 Bansi and Pierre Bienamé, with supervising producer Michael Kazimidis. I'm Alex Zosila for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.