(March 19): An index of emerging-market currencies ended the day slightly lower after the Federal Reserve (Fed) decided to keep interest rates unchanged and showed concerns over the US economic outlook and policy uncertainty.

The Federal Open Market Committee voted on Wednesday to keep the benchmark federal funds rate in a range of 4.25%-4.5%, in line with investors expectations. However, uncertainty has been increasing about the rest of the year, with traders pricing in about two quarter-point rate reductions by the end of 2025 as of Tuesday’s close, down from about three a week ago.

In his post-decision speech, Fed Chair Jerome Powell said US tariffs could delay progress in inflation, while recession risks have “moved up, but it’s not high.” The Fed’s decision, plus its take on the US economic outlook, prompted the dollar to pare earlier gains.

Stocks tracked by the MSCI EM Emerging Markets Index also posted losses for the day, snapping a three-day winning streak.

“Risk sentiment should be marginally supported by the slowdown in QT, but ultimately if hard data suggests that growth will weaken in the US, it should not be positive for emerging markets,” said Ning Sun a senior emerging-market strategist at State Street Global Markets. “Fed’s growth revision to 1.7 is quite substantial today.”

The worst performing currencies in emerging markets were the Turkish lira and the Colombian peso, both hit by negative domestic headlines. In Turkey, authorities detained President Recep Tayyip Erdogan’s most prominent rival Ekrem Imamoglu, which sent the lira plunging more than 12% against the dollar before paring losses. The arrest of Istanbul Mayor Imamoglu also triggered a slide in Turkey’s main stock index in Istanbul and sent government bond yields soaring.

“This is a bit of a shock to the system — the trend, at least recently, has been toward greater stability, whether that be economic or political,” said Nick Rees, head of macro research at Monex Europe Ltd.

In Colombia, the country’s Finance Minister Diego Guevara confirmed reports about his resignation, adding to investor’s uncertainty about the willingness of the Gustavo Petro administration to commit to fiscal balance.

Meanwhile, the Brazilian real was leading gains emerging-market peers, touching its strongest levels since October ahead of a monetary policy decision later this afternoon. The central bank is expected to raise the benchmark rate to 14.25% from 13.25%.

In credit markets, Ukraine’s dollar bonds were the worst performers among emerging-market peers — even underperforming Turkey’s notes — after Tuesday’s US-Russia talks on Ukraine failed to deliver a breakthrough.

Russia on Wednesday confirmed a major prisoner swap with Ukraine, which involved the return of 175 Russian servicemen in exchange for handing over 197 Ukrainian prisoners of war. Ukrainian President Volodymyr Zelenskiy is expected to speak with US President Donald Trump by phone.

Indonesia’s central bank kept its key interest rate unchanged for a second month in a row, moving to safeguard the rupiah amid rising capital outflows.