Federal Reserve Holds Interest Rates Steady January 2025
On Wednesday 29th January 2025, the Federal Reserve announced that after lowering interest rates by 100 basis points in the last few months of 2024, they were holding interest rates steady in a range of 4.25% – 4.50%. The FOMC (Federal Open Market Committee) had no dissenting voters as they agreed unanimously to press the hold button on interest rates. The Chairman of the Federal Reserve said “We do not need to be in a hurry to adjust our policy stance” adding that the Federal Reserve was pausing interest rates in order to see further progress on inflation which currently remains somewhat elevated but has moved closer to the goal of 2%.
Currently some analysts are saying that the US economic landscape appears stable but at the same time wildly uncertain especially as recent macroeconomic fundamentals have been unchanged and healthy. However, with the elevation of Donald Trump to the White House Chairman Powell noted “Federal Officials are waiting to see what policies are enacted” and what effect such policies (tariffs, taxes, immigration) will have on inflation. Experts have said that the prospects of tariffs on Mexico and Canada, who are two key trading partners with the United States, have cast a shadow over the economy of the United States.
Following the announcement that the Federal Reserve were holding interest rates, President Donald Trump renewed his attack on the central bank saying they had “failed to stop the problem they created with inflation”. Previously, President Trump had demanded that interest rates come down further, but Chairman Powell, who is doing his best to keep himself and the Federal Reserve above political machinations noted that keeping interest rates on hold was not political despite the fact it may look that way. The president also went on to say that the Federal Reserve has “done a terrible job on bank regulation” and insisted he will put this responsibility solely within the purview of the Treasury Department. However, some legal experts have said that this would be against the law.
In December 2024 Federal Officials advised that they expected only two rate cuts throughout the whole of 2025, which was a reduction in policy that had not been previously anticipated by the financial markets. Recent data released showed that in December 2024, an underlying measure of consumer prices rose by less than anticipated being the first decrease since June 2024. Analysts have looked back at President Trump’s first stint in the White House where he promised more tariffs on countries exporting to America, taxes on workers and companies will come down, and a massive number of jobs and factories will come home. In the end the exact opposite happened, and the Federal Reserve faced a slowing economy led by factories announcing many redundancies. So perhaps Chairman Powell and his officials can feel somewhat vindicated by keeping rates on hold.
