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Informist, Wednesday, Jan. 29, 2025

 

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--US FOMC leaves federal funds rate target range unchanged at 4.25-4.50% 
--US FOMC: Recent data suggests economic activity expanded at solid pace 
--US FOMC: Unemployment stabilised at low level, labour mkt conditions solid 
--US FOMC: Inflation remains somewhat elevated
--US FOMC: Risks to employment, inflation goals roughly in balance
 

 

NEW DELHI – The US Federal Open Market Committee unanimously voted to leave the federal funds target range unchanged at 4.25-4.50%, in the rate-setting panel's first meeting after Donald Trump was sworn in as the US President earlier this month.

The FOMC left interest rates unchanged in the first meeting of 2025, having lowered the benchmark rate by a total of 100 bps in the previous three meetings. The committee's decision was in line with market expectations. At 0005 IST, the CME FedWatch tool showed that Fed fund futures reflected a near 100% probability of the FOMC leaving rates unchanged. At 0035 IST, the yield on the 10-year US Treasury yield was 4.56%, little changed from before the announcement of the rate decision.

 

"Recent indicators suggest that economic activity has continued to expand at a solid pace," the Federal Reserve said in its FOMC statement Thursday. "The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated." 

 

This was the first FOMC meeting after Trump was inaugurated as the 47th President of the US on Jan. 20. Trump has previously said that interest rates should be lowered. Markets will await US Federal Reserve Chair Jerome Powell's comments at the press conference, which starts at 0100 IST, on the effect of Trump's proposed tariffs on the US rate-cut cycle. 

 

The committee said 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 statement said. 

 

Inflation in the world's largest economy remains above the Fed's 2% target, with core personal consumption expenditure inflation rising to 2.8% in November and expected to have stayed at the same level in December. The Fed's preferred inflation gauge is expected to remain above 2% even by the end of 2026, as per the Summary of Economic Projections, released at the December meeting.

 

According to the projections, the median Fed official expects 50 basis points of rate cuts in 2025. "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," Thursday's statement said.

 

The committee will continue to monitor the implications of incoming information for the economic outlook to assess the appropriate stance of monetary policy, the statement said, adding that the committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.

 

The committee said it would continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities, as described in its previously announced plans. The Fed has been trimming its balance sheet by $60 billion every month in Treasury and mortgage-backed securities since Jun. 1.  End

 

US$1 = INR 86.54

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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