Federal Reserve Holds Rate at 4.25–4.50% in January 2025, Pausing Easing Cycle

The Federal Reserve held its federal funds target range at 4.25% to 4.50% at the conclusion of its January 2025 meeting on Wednesday, pausing the easing cycle it had begun in September 2024 as policymakers assessed the persistence of above-target inflation and the continued strength of the United States labour market. The decision was unanimous among the members of the Federal Open Market Committee.

Chair Jerome Powell, speaking at a press conference following the announcement, said that the Committee did not need to be in a hurry to adjust its policy stance. At its December 2024 meeting, the FOMC cut rates by a further 25 basis points and signalled fewer reductions in 2025.

INFLATION AND THE LABOUR MARKET

Inflation had declined from its post-pandemic peak but remained above the Fed's 2% objective at the time of the January meeting. The Committee's statement noted that the labour market remained solid, with the unemployment rate having stabilised at a low level, and that inflation remained somewhat elevated.

Powell said that, having cut rates by a full percentage point, the Committee could wait for further progress on inflation before making further adjustments.

FIRST DECISION UNDER NEW ADMINISTRATION

The January meeting was the first rate decision to take place under the administration of President Donald Trump, who had been inaugurated on 20 January 2025, nine days before the FOMC announcement. Asked about President Trump's call for lower rates, Powell said he would not comment on the President's remarks and that the Fed would keep using its tools to achieve its goals.

The next FOMC meeting is scheduled for March 2025.