The Federal Reserve decided to keep its federal funds target rate steady at 4.50%, continuing the pause in rate cuts that began in January 2025.

This move reflects the Fed’s growing concern about inflation, which remains above its target despite some recent moderation.

As Fed Chair Jerome Powell notes: “Uncertainty around the economic outlook has increased” — highlighting the Fed's delicate balancing act between employment and price stability.

This pause follows a series of rate reductions that started in September 2024. But inflationary pressures have prompted the Fed to reassess its strategy.

According to Paradigm’s macro expert Jim Rickards: “The Fed is not leading the markets to lower rates; they are following the markets.”

He points out that market indicators like the Secured Overnight Financing Rate (SOFR) at 4.30% and 1-month Treasury yields (4.29%) are already below the federal funds target, showing a disconnect between Fed policy and market realities.

That said, the Fed’s decision on Wednesday comes amidst mixed economic signals…

Your Rundown for Friday, March 21, 2025...

“Don’t Watch the Fed”

Official unemployment has risen from a low of 3.4% in January 2023 to 4.1% today, while inflation has climbed from 2.4% in September 2024 to 2.8% in February 2025.

Jim argues that the Fed’s reliance on the dual mandate — balancing employment and inflation — is flawed because “there is no tradeoff” between the two.

Historical data shows no consistent correlation between unemployment and inflation, making it challenging for the Fed to achieve its goals.

The Fed also released its updated Statement of Economic Projections (SEP), which includes forecasts for interest rates, unemployment and growth.

Jim, however, dismisses these projections as unreliable, calling them “just media talking points and entirely for show.”

Despite this skepticism, markets are still focused on potential future cuts, with expectations of at least two reductions later this year if economic conditions worsen further.

In fact, Jim’s not ruling out a rate cut on May 7th.

He likewise notes the Federal Reserve has decided to slow down the reduction of its balance sheet which ballooned enormously during the pandemic.

Jim comments that this “is a dovish move” and “a backdoor form of [a] rate cut.”

Still, Jim emphasizes that “the Fed is behind the curve,” reacting too late to evolving economic conditions.

President Trump agrees: “The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy,” he says on Truth Social. “Do the right thing.”

As Jim concludes: “Don’t watch the Fed; watch the interest rate markets if you want to know what’s going on.” This approach offers a clearer picture of where the economy is headed.

Market Rundown for Friday, March 21, 2025

S&P 500 futures are down 0.40% to 5,685.

Oil is slightly in the red at $68.05 for a barrel of WTI.

Gold, too, is slightly down to $3,041.90 per ounce.

And Bitcoin’s down 0.45% to $83,780.