The Federal Reserve held its benchmark interest rate steady on Jan. 29, pausing after three consecutive cuts last year. The decision reflects the central bank’s cautious stance as it assesses inflation trends and awaits further clarity on President Donald Trump’s economic policies.
In its statement, the Fed noted the job market remains “solid,” with unemployment stabilizing at a low 4.1%. However, it also acknowledged persistent inflationary pressures, stating that inflation “remains somewhat elevated.” These factors suggest fewer rate cuts may be forthcoming.
“With ... the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” said Fed Chair Jerome Powell during a news conference, according to the Associated Press.
Despite Trump’s recent comments advocating for lower rates to boost economic growth, Powell declined to comment directly, stating he had “no contact” with the president regarding interest rate decisions. He reiterated that the Fed is taking a measured approach, emphasizing that policymakers are still evaluating the potential effects of Trump’s proposed tariffs, tax cuts and deregulation efforts.
Economists predict the Fed may not reduce rates again until mid-year. “We are all in wait-and-see mode, including the Fed,” Kathy Bostjancic, chief economist at Nationwide Financial, told the AP.
The Fed’s decision comes amid contrasting moves by other central banks. The European Central Bank and Bank of Canada have both signaled rate cuts, while the Bank of Japan is moving in the opposite direction, raising rates for the first time in years due to rising inflation.
For U.S. households and businesses, high borrowing costs are expected to persist. Mortgage rates, which briefly dipped below 7%, remain elevated, making homeownership more challenging. Treasury yields have also climbed, reflecting investor expectations of prolonged economic growth and inflation.
While the Fed has not ruled out further rate cuts in 2024, Powell emphasized that policymakers need to see “real progress on inflation or ... some weakness in the labor market before we consider” adjusting rates further.
