- The two-day FOMC meeting finished
- Fed holds interest rates at a range of 4.25% to 4.5%
After a two-day FOMC meeting, the US Federal Reserve decided to keep current interest rates at a range of 4.25% to 4.5%.
Among other statements, US Fed Chair Jerome Powell said that despite recent inflation data looking good, they are not going to over-interpret two good or two bad [inflation] readings.
More About Interest Rate Cuts in 2025
After strong measures in interest rates of 5.25 percentage points since March 2022 due to the worst inflation in 40 years and following concerns about it – the situation seems to be improving noticeably. We have seen a few 0.25-point cuts in 2024 as a measure, but none in early 2025.
However in a videoconference address to the World Economic Forum in Davos, Switzerland, last week, 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.”
Also, he added that:
“I know interest rates much better than they do.”
Jerome Powell has made it clear that the Fed will take a careful approach and insist on its expertise in these matters:
“The public should be confident that we will continue to do our work as we always have.”
The already shaky markets, most notably Nvidia, reacted negatively to the decision. Particularly, the broad market index fell 0.47% to close at 6,039.31, while the Nasdaq Composite lost 0.51% to end at 19,632.32, and Dow Jones Industrial Average shed 136.83 points, or 0.31%, to 44,713.52.
That said, overall expectations are in line with Jerome Powell, who does not expect more than 2-3 rate cuts in 2025 if their inflation measures continue to deliver good news.
Conclusion
We are seeing an interesting situation where on the one hand the rate cut in January 2025 is not expected to happen, but the overall economic vector and the effects of Trump’s initiatives give a wide variety of options for the future.
Be aware and stay tuned.
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