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4 min read | Updated on January 29, 2025, 17:27 IST
SUMMARY
Fed chair Powell’s press conference will be closely watched for his views on inflation and the future direction of interest rates
US Federal Reserve chairman Jerome Powell.
The US Federal Reserve will deliver its first monetary policy decision of the year on Wednesday, January 29. According to the reports, the Federal Open Market Committee (FOMC), chaired by Jerome Powell, is expected to keep the interest rate unchanged.
This will be the first monetary policy announcement after US President Donald Trump returned to office for a second term. Trump last week made clear he expects to comment on interest-rate policy and said, “I know interest rates much better than they do."
Fed chair Powell’s press conference will be closely watched for his views on inflation and the future direction of interest rates. The US central bank has cut their rate for three meetings in a row, to about 4.3%, from a two-decade high of 5.3%.
The US Fed’s two-day policy meeting began on January 28 and will end on January 29.
The decision will be announced by chairman Jerome Powell on Wednesday at 2:30 PM ET (around 12:30 AM IST, Thursday).
The US Fed announced its eighth and final monetary policy decision for 2024 last month and slashed its benchmark interest rate by 25 basis points (bps) to 4.25-4.5%. The rate-setting committee had cut the federal funds rate for the third straight time after kicking off its policy easing cycle in September for the first time in four years.
The central bank projects just two quarter-percentage-point rate reductions by the end of 2025, down from their September estimate of four rate cuts.
A pause in the US Fed rate cut means that consumers can’t expect near-term relief on borrowing costs.
The Fed officials are also navigating a delicate period for the economy and want to keep borrowing costs high enough to push inflation back to their 2% target without keeping them too high for too long and plunging the economy into a recession.
The US economy in the third quarter expanded steadily, powered by a broad-based advance in consumer spending and steady business investment. The country’s gross domestic product (GDP) increased at a 2.8% annualised pace in Q3, according to the second estimate of the Bureau of Economic Analysis.
The economy’s consumer spending advanced 3.5%, the most in 2024.
Inflation has remained persistently high in recent times, although a core measure, which excludes food and energy is closely monitored by the Fed due to its reflection of more sustainable trends.
The US added 256,000 jobs in December. Its unemployment rate dipped to 4.1%, defying expectations of remaining steady at 4.2%.
The Labor Department in January reported that job growth was up last month from 212,000 in November. For all of 2024, the economy added 2.2 million jobs, down from 3 million in 2023, 4.5 million in 2022, and a record 6.4 million in 2021 as the economy bounced back from massive pandemic layoffs.
The US president last week said he seeks to lower Fed interest rates by unleashing energy production and would speak to the US Federal Reserve if needed. "I'll demand that interest rates drop immediately," he told the World Economic Forum (WEF) in Davos, Switzerland, in a virtual address last week.
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