Fed holds rates, unanimous decision
US Federal Reserve keeps interest rates steady in unanimous decision
The US Federal Reserve has decided to keep interest rates unchanged. This decision was made unanimously by all officials and was announced on January 29, 2025. The interest rate will remain between 4.25% and 4.50%. This move is important because it is the first major decision made under the second term of President Donald Trump.
Economic situation and inflation
The Federal Reserve said that the US economy is still growing at a solid pace. However, the central bank also noted that inflation remains somewhat high, and the economic outlook is uncertain. Despite the growth, inflation has not yet reached the ideal target of 2%.
This decision comes at a time when the US economy is dealing with challenges, especially due to the effects of China's new AI tool, DeepSeek, which has been affecting the stock market. Several American companies, including Nvidia, have seen losses because of this.
In its statement, the Fed mentioned that the unemployment rate in the US has remained low. The labour market also continues to be strong, showing that many people are employed. However, the Federal Reserve still faces challenges in balancing employment goals with inflation control.
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The Federal Reserve's decision to keep interest rates steady was made unanimously by all 12 officials who voted. This means everyone agreed on this decision. In previous meetings, there had been some disagreement, but this time, all the members were in full support.
The last meeting had seen Cleveland Fed President Beth Hammack voting differently. She preferred to pause the rate hike, rather than go for a quarter-point cut. However, Hammack did not vote at this meeting. She will be an alternate voter for the rest of the year.
Inflation and future plans
One important thing the Fed mentioned is that inflation is still higher than desired. The inflation rates are still about half a percentage point above the target. However, the Federal Reserve is hopeful that inflation will continue to go down this year. They are holding off on any further interest rate cuts until they see clear data confirming that inflation is under control.
The Federal Reserve is very careful when it comes to adjusting interest rates. They said that in the future, they will continue to look at new data before making any decisions. They will consider the economic situation and the balance of risks before making any changes.
After the Fed's announcement, interest rate futures indicated that investors believe the Fed will not lower rates again until June 2025. This is important because the decision to keep rates steady may impact the stock market and bond yields. After the announcement, the stock market saw a slight decline, and bond yields stayed mostly the same.
Looking ahead, the Federal Reserve will continue to assess economic data before making any decisions about interest rates. They have made it clear that they will carefully evaluate the risks and the outlook for inflation.
The US economy has been expanding, but inflation remains a concern. The Fed has to ensure that they strike the right balance between supporting economic growth and controlling inflation.
The Fed’s decision to pause on rate cuts for now shows that they are being cautious and careful in their approach to managing the economy. The future of interest rates depends on how inflation progresses and how the US economy performs in the coming months.
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