The federal preparation system has overturned recent trends in alleviating policies to reduce major interest rates on Wednesday and investigate what could become a political and economic landscape in the future.
With a widely expected movement, the Central Bank’s Federal Open Market Committee left the overnight borrowing rate in a range of 4.25 % to 4.5 %.
This decision was equivalent to three straight cuts since September 2024, and the first Fed conference was marked since the federal critic Donald Trump took over the presidential position last week. I knew that almost immediately wanted to reduce interest rates to the central bank.
The statement after the meeting has lost some clues about the reason behind the decision to stabilize the rate. While providing a slightly optimistic perspective on the labor market, he lost important references from the December statement, and stated that inflation has progressed toward the “2 % Fed inflation goal of Fed”.
“In the past few months, the unemployment rate has been stable at a low level, and the labor market has remained solid,” he said. “Inflation remains a little rising.”
Investors will be locked to comment from Jerome Powell Chair at 2:30 pm for more nuances.
More powerful labor markets and stubborn inflation reduce incentives for Fed to alleviate policies. The statement has once again stated that the economy is “continuing to expand at a solid pace.”
A recent statement from a policy creator shows anxiety about whether or not the progress of damaging inflation has stagnated. Authorities also want to see how the previous reduction is going on the economy, although most of the rates are expected to be reduced this year.
Furthermore, this decision is contrary to the unstable political background.
In over a week, Trump has been signed through Washington’s policies and political norms, signing hundreds of administrative orders to implement agendas through Washington’s policies and political norms. The President has supported tariffs as both economic and foreign policy tools, ordering people who illegally crosses the borders to expel the country, and publish a series of deregulation measures.
In addition, Trump said last week about his confidence that he would reduce inflation, and “demanded” interest rates immediately. The president has no authority to the federal government besides nominating members of the Board, but Trump’s statement has a potential controversy with policy proprietors, as in his first term. Masu.
Inflation has dropped sharply from the peak of 40 years, which was hit in the mid -2022, but the 2 % goal of the Fed remains unbearable. In fact, the central bank priority price setting gauge showed that the inflation rate of the headline in November was high to 2.4 %.
Traders set the price with almost 100 % of the probability that the Fed holds the line at this meeting, but in fact there is no other cut until June. According to the CME group data, the market has a funding rate of about 3.9 % by the end of 2025, and the probability of reducing points in the second quarter of the year in the second quarter is 61 %. After the decision, the stock decreased.
According to ATLANTA FED, economic growth is steady in 2024 and consumer expenditures are progressing smoothly, and gross domestic production has been tracked at an annual growth rate of 2.3 % in the fourth quarter, 3.2 % on Wednesday. I reduced the estimate. Because data on private domestic investment has weakened.
At the meeting, the change of the voting configuration of the FOMC was also characterized. Powell and the other seven governor’s committee members joined Chicago’s regional President Austtan Goursby, Alberto Musalem of St. Louis, Susan Collins in Boston, and Kansas City’s Jeffry Schmid. Voting to avoid changing funds was unanimous.
