Fed has rates steady, taking less self -assured view of inflation

Federal Reserve had its most important interest rate in control Wednesday and turned a recent tendency to ease the policy as it is investigating what is likely to be an uneven political and economic landscape ahead.

In a broadly expected step, the central bank’s federal open market committee left its overnight loan in an interval between 4.25%-4.5%.

The decision followed three straight cuts since September 2024 worth a full percentage point and marked the first bold meeting since the frequent bold critic Donald Trump took over the presidency last week and almost immediately knew his intentions that he wants the central bank to reduce The rates.

The direction after the meetings fell a few clues about the rationale behind the decision to keep the rates stable. It offered a somewhat more optimistic view of the labor market while losing a key referral from the December declaration that inflation “has made progress towards” Fed’s 2% inflation target.

“Unemployment has stabilized at a low level in recent months and the labor market conditions remain solid,” the new language reads. “Inflation remains somewhat elevated.”

A stronger labor market and stubborn inflation would provide less incentive to fat to ease the policy. The statement again indicated that the economy “continued to expand at a solid pace.”

During a news conference, President Jerome Powell added that the labor market has not been a significant source of inflation pressure. He said the central bank should see “real progress with inflation or some weakness in the labor market before we consider making adjustments.”

Shares fell after the decision to leave the rates unchanged.

The latest statements from decision makers have shown some fear of progressing progress in reducing inflation has stopped. Officials have also said that they will see how the previous cuts work through the economy, although most people expect interest reduction this year.

In addition, the decision comes against an unstable political background.

In just over a week, Trump has cut a cut through Washington policy and political norms as he has signed hundreds of executive orders seeking to implement an aggressive agenda. The president has supported tariffs as both an economic and foreign policy tool, ordered a wave of deportations against those who cross the border illegally, and have put forward a number of deregulating measures.

Furthermore, last week Trump talked about his confidence that he will reduce inflation and said he would “demand” that interest rates will be lowered immediately. Potentially disputed relationship with the decision makers much as in his first period.

Said Powell He has had no contact with the president since he made these statements.

Inflation has moved sharply from the 40-year-old top, it hit by mid-2022, but Fed’s 2% target has remained evasive. Actually the central bank of the central bank Preferred pricing meter showed the headline inflation crossed higher to 2.4% in November, the highest since July, while the core measure excluding food and energy kept at 2.8%.

Dealers had priced in a nearly 100% likelihood that Fed had the line at this meeting and actually does not see another cut that will come until June. Markets prices in a fund rate of approx. 3.9% by the end of 2025, which implies a 61% probability of two quarters percentage point cuts this year, according to CME group data.

Economic growth has been solid and consumer costs are well kept well by 2024. Gross domestic product traces with an annual growth rate of 2.3% for the fourth quarter, according to Atlanta Fed, which lowered the estimate on Wednesday from the previous prospect of 3.2% DA Data on Private domestic investments weakened.

The meeting also included a changed voting composition at FOMC. Powell and the other seven board members have been joined this year as voters of regional presidents Austan Goolsbee from Chicago, Alberto Musalem from St. Louis, Susan Collins of Boston and Jeffrey Schmid from Kansas City. The vote to keep the funds unchanged was unanimous.