Fed Hits Pause on Interest Rates

After cutting rates 100 basis points by late 2024, the central bank is taking a breather.

Fed Chair Jerome Powell speaks at the Jan. 29 FOMC press conference.
Fed Chair Jerome Powell speaks at the Jan. 29 FOMC press conference. Screenshot of the Jan. 29, 2025, Federal Reserve livestream by Jordana Rothberg

To start 2025, the Federal Reserve Bank is keeping the federal funds rate unmoved. Following a cut in December, the range will continue to sit at 4.25 to 4.5 percent, Fed Chair Jerome Powell announced on Wednesday.

It was widely anticipated that the central bank would make no changes at the Federal Open Market Committee meeting this week. With a new administration and lots of uncertainty about the year ahead, maintaining rates this month gives the bank breathing room for future adjustments.

According to the most recent Consumer Price Index report from the Bureau of Labor Statistics, inflation is still above the Fed’s 2 percent goal at 2.9 percent in December. Progress has been made nonetheless. The job market and economy continue to look relatively sound. Yet some observers regard tariffs, large-scale deportations and other items on the Trump administration’s agenda as potentially inflationary, another possible reason for the Fed’s decision.

“Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed,” Powell said during the FOMC press briefing on Wednesday. “Overall, a wide set of indicators suggest conditions in the labor market are broadly in balance. The labor market is not a source of significant inflationary pressures.”


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Rates were set at a relatively high 5.25 to 5.5 percent for much of last year. Then, a bullish September cut of 50 basis points preceded two 0.25 percent decreases to wrap up the year.

Next steps remain up for debate. The consensus for 2025 is that one or two more cuts, at a quarter-point each, are likely. But as always, the central bank’s moves will be data-driven. And some don’t expect any such decisions until the summer.

“We know that reducing policy restraint too fast or too much could hinder progress on inflation,” Powell said during the press briefing. “At the same time, reducing policy constraint too slowly or too little could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustment to the target range for the federal funds rate, the Committee will assess incoming data, the evolving outlook and balancing risks. We are not on any preset course.”