US Fed holds interest rates steady, signalling caution on cuts

On January 29, the U.S. Federal Reserve opted to keep interest rates unchanged, with Chair Jerome Powell signalling a cautious approach to future rate cuts. 

The decision maintains the benchmark overnight interest rate in the 4.25%-4.50% range, a level established after a series of reductions last year, Caliber.Az reports, citing foreign media.

“We do not need to be in a hurry to adjust our policy stance,” Powell stated during a press conference following the Federal Open Market Committee’s (FOMC) two-day policy meeting.

He emphasized the need for clear evidence of inflation cooling further or significant risks emerging in the labour market before considering any rate cuts. Powell reiterated the Fed’s commitment to achieving 2% annual inflation while ensuring stable employment levels.

The decision comes amid a complex economic environment, with inflation stabilizing in recent months but still exceeding the Fed’s target. While the central bank implemented three rate cuts in 2024, policymakers are now taking a wait-and-see approach, closely monitoring economic indicators before making further adjustments.

This meeting marked the Fed’s first policy decision since President Donald Trump began his second term in office. Trump, who has advocated for tax cuts, import tariffs, and regulatory rollbacks, criticized the Fed’s policy focus, blaming the 2021 inflation surge on its engagement with diversity, green energy, and climate change initiatives.

Powell refrained from directly addressing Trump’s remarks but underscored the Fed’s independence, stating that monetary policy decisions would be strictly data-driven.

Following the Fed’s announcement, U.S. stocks closed lower, although they remained above session lows. U.S. bond yields showed little movement, while the dollar remained steady against a basket of major currencies.

Short-term interest rate futures suggest that investors now anticipate the Fed will hold off on rate cuts until June, with the possibility of two quarter-point reductions over the course of the year.

By Khagan Isayev