In its first major decision during President Donald Trump‘s second term, the US Federal Reserve announced on Wednesday that it would keep interest rates unchanged. The decision, which was unanimous among the 12 voting Federal Reserve officials, keeps the interest rate in the 4.25-4.50% range. This move comes amid an uncertain economic outlook and somewhat elevated inflation.
Decision and Economic Context
The Federal Reserve’s announcement comes against the backdrop of significant market disruptions caused by China’s DeepSeek, which has affected key US corporations, including Nvidia. Despite these challenges, the Fed noted that economic activity in the United States continues to expand at a solid pace.
The central bank dropped language from its latest policy statement that previously indicated inflation had made progress toward the 2% objective. The Fed highlighted that the unemployment rate has stabilized at a low level, and labor market conditions remain solid. The agency, led by Jerome Powell, emphasized that the goals of achieving employment and inflation are roughly in balance.
Unanimous Vote and Policy
The decision to keep interest rates steady was unanimously supported by all 12 Federal Reserve officials who voted at this month’s meeting. This unanimity contrasts with last month’s meeting, where Cleveland Fed President Beth Hammack voted for a rate pause instead of a quarter-point cut. Hammack will serve as an alternate voter for the rest of the year.
Recent inflation readings have remained about half a percentage point or more above the Fed’s target. Federal Reserve officials believe that progress in lowering inflation will continue this year, but they have put rates on hold while awaiting further data.
“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” stated the Federal Open Market Committee.
Market Reactions and Future Expectations
Following the release of the Fed’s statement, short-term interest rate futures indicated that investors expect the central bank to hold off on cutting rates again until June. US bond yields remained relatively unchanged, while stocks lost some ground.
The decision to maintain interest rates is expected to create some tension between the Federal Reserve and the newly inaugurated president, who has argued that he should have some say in Fed policy.
The US Federal Reserve’s decision to keep interest rates unchanged underscores the central bank’s cautious approach amid an uncertain economic environment. As the Fed continues to monitor inflation and economic activity, its future policy decisions will likely be shaped by incoming data and evolving risks.
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