The Fed holds interest rates steady but cuts economic growth forecasts because of tariffs

Volatility has rocked US markets this month, but investors on Wednesday received a welcome boost as the Federal Reserve signaled confidence in short-term stability and refrained from jolting markets with a surprise policy decision.

US stocks closed higher Wednesday as the Fed held its benchmark interest rate steady, matching expectations. US markets have been choppy this month and stocks rallied on a sense of short-term calm.

The Dow gained 383 points, or 0.92%. The broader S&P 500 gained 1.08% and the tech-heavy Nasdaq Composite rose 1.41%.

The S&P 500 posted its best gain on a Fed rate decision day since July, according to FactSet data.

Wall Street’s fear gauge, the Cboe Volatility Index, or VIX, fell almost 10% at one point on Wednesday to its lowest level since March 3, signaling a moment of relative ease.

Wall Street opened higher Wednesday morning and remained firmly in the green, surging higher after Fed Chair Jerome Powell’s remarks this afternoon signaled confidence in the economy despite uncertainty.

The S&P 500 has been trying to claw back gains after it closed in correction territory last week, down 10.1% from its record high on February 19.

Stocks rallied after closing in the red Tuesday, resuming a brief rally that began on Friday and continued into Monday. The benchmark index on Wednesday closed down 7.6% from its record high.

The yield on the 10-year Treasury fell to 4.248%.

However, the Fed in its economic projections signaled higher expectations for inflation and slower expectations for growth this year, raising questions about future policy action.

“While the outcome of this meeting was broadly in line with market participant expectations, it clearly shows the conundrum the Fed has in balancing growth and inflation expectations,” said Charlie Ripley, senior investment strategist as Allianz Investment Management.