Federal Reserve policymakers voted Wednesday to hold interest rates steady in its first rate decision of the year.
Following its Jan. 28-29 meeting, the Federal Open Market Committee (FOMC) decided to keep the benchmark federal funds rate at 4.25%-4.50%. The widely expected move marks the first time since last September that the central bank hasn’t lowered rates, as the fight to wrangle inflation to its 2% target continues.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the FOMC said in a statement. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
The latest inflation figures have shown that concerns about rising prices may not be as severe as initially thought. The consumer price index rose 0.4% in December, bringing the annual inflation rate to 2.9%, the Bureau of Labor Statistics reported earlier this month.
Perhaps more notably, core CPI, excluding volatile food and energy, climbed just 0.2% to 3.2% — a hair below analyst expectations and a welcome sign for economists that progress on inflation remains on track. Much of that was driven by a 2.6% monthly increase in the energy index, including a 4.4% jump in gasoline.
That followed a series of positive indicators on the economy to cap off 2024. The BLS reported that wholesale inflation, as measured by the producer price index, unexpectedly cooled, rising just 0.2% in December. The latest jobs report showed payrolls rose by 256,000 jobs that same month, smashing Wall Street’s expectations. And unemployment ticked down to 4.1%, falling 0.1 percentage point from a month prior and below analysts’ projections.
The Fed’s preferred inflation indicator, the personal consumption expenditures index, is set to be released on Jan. 31.
Central bank officials previously expressed concern about a potential resurgence in inflation this year, particularly given the possibility of inflationary policies put forward by the new Trump administration.
“Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes of the December committee meeting said. “As reasons for this judgment, participants cited recent stronger-than-expected readings on inflation and the likely effects of potential changes in trade and immigration policy.”
In its updated Summary of Economic Projections published after last month’s meeting, Fed officials indicated that they could carry out just two interest rate reductions in 2025, given 25-basis-point cuts. The Fed reduced rates by a full percentage point over the span of three months last year.
Federal Reserve Chair Jerome Powell said Wednesday in a press conference that he’s had “no contact” with President Donald Trump despite Trump’s recent statement that he would demand immediate interest rate cuts.
Powell declined to answer further questions regarding the president’s statement.
“The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work,” Powell said.