U.S. Federal Reserve Keeps Rates at 3.5 Percent
Policymakers on the Federal Open Market Committee unanimously decided to maintain the benchmark rate between 3.5 percent and 3.75 percent, ending a three-month streak of consecutive reductions aimed at shielding the economy from employment concerns and broader market volatility.
The central bank's post-meeting statement noted: "Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated."
Future monetary policy adjustments will hinge on emerging economic data, shifting forecasts, and risk assessment, the Fed indicated, offering minimal forward guidance on the timing of potential moves.
Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, projected three rate reductions throughout 2026 in comments to media, anticipating the initial cut in March as joblessness climbs while price growth hovers around 3 percent.
Other analysts remain doubtful about aggressive easing. Dean Baker, co-founder of the Center for Economic and Policy Research, expressed skepticism to media regarding multiple cuts under present circumstances. "If there is not a collapse of the AI bubble, I doubt they will lower rates more than once," he stated. "And if U.S. President Donald Trump imposes more large tariffs, likely not at all."
Baker noted employment conditions have weakened without collapsing entirely, while inflation continues exceeding the Fed's objectives. "The labor market has weakened, but it's not falling off a cliff, and inflation is still well above the Fed's target, so I don't see them feeling much need to cut rates," he explained.
Federal Reserve Chair Jerome Powell, whose leadership extends through May 2026, faces mounting political pressure from President Trump, who has persistently attacked the central bank while demanding lower borrowing costs. Powell has additionally weathered congressional criticism regarding budget overruns for the Federal Reserve's Washington headquarters renovation project.
During Wednesday's media briefing, Powell conveyed measured optimism. "If you look at the incoming data since the last meeting, there is a clear improvement in the outlook for growth," he remarked.
"Inflation performed about as expected ... Some of the labor market data came in suggesting evidence of stabilization. So it's overall, a stronger forecast, really," he continued.
December unemployment declined to 4.4 percent from November's revised 4.5 percent figure, according to the Bureau of Labor Statistics.
Nevertheless, hiring activity remains sluggish despite minimal layoff activity, with first-time unemployment claims reaching a two-year nadir.
Price increases continue burdening American households. Though inflation has moderated since 2022's peak, the current rate near 3 percent exceeds the Fed's 2 percent objective, strengthening arguments among certain officials for delaying additional cuts until definitive proof of sustained price deceleration materializes.
"The expectation is that we will see the effects of tariffs flowing through goods prices peaking, then starting to come down, assuming there are no new major tariff increases that are begun, and that is what we expect to see over the course of this year," Powell stated.
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
