Federal Reserve officials on Jan. 29 held interest rates steady, with inflation still above its 2% target and President Donald Trump’s call for the central bank to further cut rates.
The Federal Open Market Committee left the federal funds rate unchanged at a range of 4.25% to 4.5% following its two-day meeting. The decision, which was unanimous among the committee’s 12 members, comes after three successive rate cuts to close out 2024 — quarter-point cuts in December and November, and a half-point reduction in September.
“With our policy stance significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Fed Chair Jerome H. Powell said at a news conference. “We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”
Powell reiterated that the Fed isn’t on a preset course with respect to monetary policy and will be assessing incoming economic data when making future decisions.
He also said the committee will be closely watching economic policies implemented by the Trump administration.
“We don’t know what will happen with tariffs, with immigration, with fiscal policy and with regulatory policy,” Powell said. “We need to let those policies be articulated before we could even begin to make a plausible assessment of what their implications for the economy will be.”
The Trump administration has signaled implementing sweeping tariffs, mass deportations and fewer regulations on the business community.
Prior to the Fed’s announcement, the Bureau of Labor Statistics on Jan. 15 reported that the consumer price index rose an annualized 2.9% in December from a year earlier, above the 2.7% figure recorded in November, and also above forecasts.
Separately, core personal consumption expenditures, or core PCE, the Fed’s preferred inflation gauge, rose 2.8% year-over-year in November, the same year-over-year increase as October.
Trump, who in his first term frequently insisted the Fed cut rates, said he’ll “demand” it during a virtual Jan. 23 speech at the World Economic Forum’s annual event in Davos.
After calling for an end to the Russia-Ukraine war, Trump said, “With oil prices going down, I’ll demand that interest rates drop immediately. And, likewise, they should be dropping all over the world. Interest rates should follow us.”
Powell has preached the importance of Fed independence in his public remarks and said the central bank does not take outside voices into account when making decisions.
When asked about Trump’s remarks, Powell on Jan. 29 declined to comment and said he hasn’t had any recent contact with Trump. He added that the American public should have confidence the Fed will continue to do its job independent of political considerations.
At its meeting in December, the committee signaled it would initiate two quarter-point rate cuts in 2025, although Powell said all future decisions would be based on incoming data.
The Fed’s next meeting is March 18-19.
