Washington (AFP) – The US Federal Reserve is in no “hurry” to adjust interest rates again, the central bank’s chair Jerome Powell said Wednesday, after policymakers voted to pause rate cuts in the first decision since Donald Trump’s White House return. The Fed’s rate-setting committee voted unanimously to keep the bank’s benchmark lending rate at between 4.25 percent and 4.50 percent, the Fed announced in a statement.
“With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell told reporters after the decision. The Fed’s pause follows three consecutive rate reductions which together lowered its key rate by a full percentage point. In its statement, the Fed said the unemployment rate had stabilized “at a low level,” and the labor market was still solid. Inflation, however, “remains somewhat elevated,” the Fed said, removing a reference in earlier statements to inflation making progress towards its long-term target of two percent.
“By design, Powell provided little in the way of new information at this FOMC meeting,” economists at Citi wrote in a note to clients Wednesday, referring to the Fed’s rate-setting committee. Powell, they added, had “effectively” kept all options for the Fed’s next rate decision in March.
The US central bank has a dual mandate from Congress to act independently to tackle inflation and unemployment. It does so primarily by raising or lowering its key short-term lending rate, which influences borrowing costs for consumers and businesses. Most analysts agree that the US economy is going fairly well, with robust growth, a largely healthy labor market, and relatively low inflation, which nevertheless remains stuck above the Fed’s target.
But in a post to his Truth Social account, President Trump slammed both Powell and the Fed, accusing them of failing “to stop the problem they created with Inflation.” Futures traders see a probability of more than 80 percent that the Fed will extend its pause to rate cuts at its March meeting, according to data from CME Group.
Since returning to office on January 20, Trump has revived his threats to impose sweeping tariffs on US trading partners as soon as this weekend and to deport millions of undocumented workers. He has also said he wants to extend expiring tax cuts and slash red tape on energy production. Most — though not all — economists expect Trump’s tariff and immigration policies to be at least mildly inflationary, raising the cost of goods faced by consumers.
“I think those policies are definitively inflationary; it’s just a question of what degree,” Mark Zandi from Moody’s Analytics told AFP ahead of the rate decision. Asked about the likely impact of Trump’s proposals, including tariffs, Powell said the Fed would have to “wait and see” how they affected the economy. At the Fed’s previous meeting, policymakers dialed back the number of rate cuts they expect this year to a median of just two, with some incorporating assumptions about Trump’s likely economic policies into their forecasts, according to minutes of the meeting.
Given the uncertainty about the effect of Trump’s policies on the US economy, analysts are now divided over how many rate cuts they expect the Fed to make in 2025. “We retain our baseline that the FOMC will cut rates 25bp (basis points) this year, in June,” economists at Barclays wrote, pointing to the economy’s underlying strength. Zandi from Moody’s Analytics said he also expects two rate cuts later in the year. But, he added, “there are meaningful odds that the next move by the Fed may not be a rate cut; it might be a rate increase.”
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