Last Updated:
US Fed Chairman Jerome Powell says labour market conditions have cooled from their overheated state and remain solid. Inflation has moved much closer to our longer-term goal of 2 per cent though it remains somewhat elevated.
US Fed Meeting Updates.
US Fed Meeting January 2025: The US Federal Reserve on Wednesday kept its key interest rates unchanged at 4.25-4.50 per cent in the first monetary policy review of the year 2025. It is in line with the market expectations.
While addressing the media after the FOMC decision, US Fed Chairman Jerome Powell said, “The economy is strong overall and has made significant progress in the past two years. Labour market conditions have cooled from their overheated state and remain solid. Inflation has moved much closer to our longer-term goal of 2 per cent though it remains somewhat elevated.”
He said the recent indicators suggest that economic activity has continued to expand at a solid pace. For 2024 as a whole, GDP looks to have risen above 2%, bolstered by resilient consumer spending.
“The unemployment rate has stabilized since the middle of last year, and at 4.1% in December, remains low. Nominal wage growth has eased over the past year, and the jobs to workers gap has narrowed,” he added.
The US Market Impact
Ahead of the policy decision, the US markets were trading lower with the Dow Jones down by 0.17 per cent and the Nasdaq trading lower by 0.78 per cent (12:13 am IST). The US Dollar Index was trading marginally higher by 0.05 per cent at 107.92, while the US 10-year bond yield was slightly up at 4.557 per cent.
After the decision, the US markets extended losses with the Dow trading lower by 0.43 per cent and the Nasdaq down by 1.04 per cent (12:41 am IST). However, the US bond yield rose to 4.573 per cent. The US dollar index remained almost flat at 107.96.
The Status Quo On Rates & The FOMC Statement
“The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate,” the FOMC said in a statement.
It added, “In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 per cent.”
The FOMC also said the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities.
Previous Rate Cuts
The US Fed on December 18 announced a cut in the key interest rates by 25 basis points to 4.25-4.50 per cent. It was the third rate cut by FOMC in three months, with the first rate cut announced in September (by 50 basis points) and second in November (by 25 bps). The first cut in the current rate cut cycle came in September after a gap of four years.
In December 2024, the US Fed projections had shown two quarter-point interest-rate cuts in 2025.
The central bank implemented aggressive rate hikes in 2022 and 2023 to combat soaring inflation, which peaked at 9.1% in mid-2022. However, inflation has gradually cooled, coming closer to the Fed’s 2% target.
