Federal Reserve announces interest rate -cut break

On By Littum

Topline

The Federal Reserve announced that it will keep interest rates at the same level set last month, a step that is largely expected of the financial markets – although the tress wants from President Donald Trump.

Key facts

The political turnover of the federal open market committee unanimously agreed to target federal funds of 4.25% to 4.5%, the US central bank announced on Wednesday afternoon after the end of the FOMC’s two-day meeting.

The break breaks a three-meeting trait of cuts going back to September when Fed rolled its first rate cut since March 2020.

FOMC Order The noted unemployment “has stabilized at a low level” and “Inflation remains somewhat elevated”, especially the removal of a reference from its prior rates of inflation that makes “progress” towards the target of 2%.

Investors expected widely that Fed would have rate fixed and pricing in 99.5% odds for a break prior to the message, According to To CME Group’s Fedwatch Tool, which tracks derivatives deals with monetary policy.

The markets were a little touched by the telegraphed FED update as the S&P 500 had a slight fall for the day, and the benchmark 10-year-old US government bonds moved up around two basic points.

Main critic

Wednesday’s meeting may have been routinely, but Fed’s high profiled headback with Trump is not. Last week, Trump said Almost on the World Economic Forum he will “demand that interest rates immediately fall,” repeating in advance before Comments On his faith, the president “should have … say” about monetary policy. And this year’s bold decisions are likely to “hinge to a large extent on how the committee chooses to handle tariffs,” according to Goldman Sachs Chief US Economist David Mericle, who sets the scene for the impact of perhaps Trump’s most prominent economic policy on prices moving on As import taxes are potentially a further roadblock to tame inflation.

Crucial quote

When asked about Trump’s comments last week, Powell said he had “no contact” with the president and refused to respond to Trump’s comments. “The public must be sure that we will continue to do our job … to hold our heads down,” Powell said Wednesday.

Key background

Wednesday solidifies the marked scaled expectations of much lower rates where Fed has a rate well above below the 3% level they stood from 2009 to 2021. Fed maintains the restrictive monetary policy like inflation stands over its 2% target for 45 consecutive months and counts, while economic growth has remained resistant and unemployment relatively low despite higher rates, making the cut less urgent to start the economy. Fed controls only directly the rate by which financial institutions can lend their reserve funds to each other, but borrowing costs from priority loans to corporate loans tend to move in the same direction as the central bank -determined rates. The FOMC meeting in December shook US markets when Fed-Employees’ median forecast called for only 0.5 percentage points of cuts in 2025, a decrease from the prior prognosis of a full percentage point cutting, and Fed-chairman Jerome Powell said it was A “closer call” about even lowered rates at this meeting. It related to investors who were hungry for lower rates, as cheaper loans help corporate profit margins, as the S&P 500 stock index fell 3%, the second worst day in 2024.

Crucial quote

It’s a “dull start to a tumultuous year for bold,” JPMorgan Chases Chase’s head of US economist Michael Feroli wrote in a client note that previews the FED message.

Additional reading

ForbesFederal Reserve concerned about how Trump policies on customs and immigration can affect inflation, minutes showBy Derek Saul