The Federal Reserve kept interest rates at the current target range of 4.25 percent to 4.50 percent after its January meeting, according to reports. The pause comes after the central bank cut rates three consecutive times to end 2024.
At his press conference, Federal Reserve Chair Jerome Powell emphasized that the central bank is in no hurry to adjust its policy stance, particularly as the economy remains strong
“The range of possibilities is very, very wide,” he said. “We don’t know for how long or how much, what countries. We don’t know about retaliation. We don’t know how it’s going to transmit through the economy to consumers.”
The US economy remains resilient, with a strong labor market. However, inflation is still deemed ‘somewhat elevated’, prompting the Fed’s committee to reiterate the cautious approach outlined in December:
“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.”
In December 2024, the Fed surprised markets by raising its inflation forecast for 2025 to 2.5 percent and cutting its projection for interest rate reductions to just two for the year, down from four in its September outlook.
Different outlook in Europe
The situation in Europe shows an economic outlook that is deteriorating, and inflation is making steady progress towards the 2 percent target.
On Wednesday, the German government slashed its 2025 economic growth forecast to just 0.3 percent, down from the previous estimate of 1.1 percent in October.
Following the Fed’s decision and ahead of Powell’s press conference, the euro fell to 1.04 against the US dollar, reflecting the greenback’s strength.
