US Federal Reserve Announced To Pause Interest Rate Cuts

The Federal Bank on 29th January announced hitting the brakes on the interest rate cuts and confirmed to follow a more cautious approach, signalling a wait-and-watch approach towards President Donald Trump’s policies.  The news broke out soon after President Donald Trump announced bringing down the interest rate “immediately”.

The current interest rate in America remains around 4.25% -4.5%, as per the central bank’s latest statement. 

Markets Respond to Central Bank’s Decision

Markets had already expected the Federal Reserve to take a cautious approach to rate cuts this year after data indicated that progress toward lowering inflation to the central bank’s 2% target had stalled.

In December, inflation rose more than anticipated to 2.9%, with the Consumer Price Index (CPI) accelerating for the third consecutive month. 

Unchallenged Decision

A key takeaway from the Fed meeting is that policymakers unanimously decided to keep lending rates unchanged.

Towards the end of 2024, the Fed implemented a total of 100 basis points in rate cuts, including a standard 25-basis-point reduction at its final meeting in December.

Analysts remain divided on the number of rate cuts expected this year, citing uncertainty over the economic impact of President Trump’s trade and immigration policies.

The Fed stated that it will continue assessing incoming data to evaluate economic conditions and stands ready to adjust monetary policy if emerging risks threaten its objectives.

As the US central bank operates under a dual mandate to manage inflation and unemployment independently, analysts note that Trump’s presidency could complicate the rate-setting committee’s decision-making process.