Fed Maintains Rates, Keeps Sights Set On 2% Inflation Target
The Fed says the economic outlook is uncertain and that it remains highly attentive to inflation risks.
The nation’s benchmark interest rates will hold steady at the current 5.25% to 5.5% range as the inflation target of 2% remains the goal, the Federal Open Market Committee (FOMC) announced today (January 31).
“The committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the committee remains highly attentive to inflation risks,” the FOMC, the central bank’s rate-setting group, said in a statement at the end of its two-day monetary policy meeting. This is the fourth consecutive meeting in which the FOMC has left rates unchanged.
Recent indicators show that economic activity has expanded at a solid pace, the committee said. While job gains have moderated since early last year, they remain strong, and the unemployment rate remains low, it said.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Inflation has also eased over the past year but remains high, the FOMC said. Before adjusting the target range for the federal funds rate, the committee “will carefully assess incoming data, the evolving outlook and the balance of risks,” it said, adding that it does not expect to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.
The move follows last week’s announcement that the nation’s fourth-quarter gross domestic product (GDP) grew 3.3%, which indicates that the economy has not lost momentum yet, according to Kiplinger’s GDP Outlook report.
Treasury Secretary Janet Yellen commented on the strong growth in a speech on the state of the economy in Chicago last week. The economy now produces more goods and services than it did before the COVID-19 pandemic, Yellen said. Recent data shows strong economic growth last year, including in the last quarter. “At the same time, inflation has come down significantly,” she said.
Consumer sentiment has increased by 29% since November and is now at its highest level since 2021, Yellen said, adding that the labor market is healthy. This has been “the fairest recovery on record,” she said.
Federal Reserve Chairman Jerome Powell is set to provide more details on the FOMC decision at his subsequent press conference.
The committee's decision surprised no one on Wall Street.
“As anticipated, the Federal Reserve has shifted its stance from a hiking bias to a data-dependent approach. With steady economic growth, it is expected that policymakers will wait for more evidence of a sustained downtrend in inflation before making any changes,” said Whitney Watson, global co-head and co-chief investment officer of Fixed Income and Liquidity Solutions within Goldman Sachs Asset Management.
“The market's expectation of a 50% probability of a rate cut by March seems reasonable, given the recent positive signals from the Fed's preferred measures of inflation and wage growth,” Watson added.
RELATED CONTENT
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Esther D’Amico is Kiplinger’s senior news editor. A long-time antitrust and congressional affairs journalist, Esther has covered a range of beats including infrastructure, climate change and the industrial chemicals sector. She previously served as chief correspondent for a financial news service where she chronicled debates in and out of Congress, the Department of Justice, the Federal Trade Commission and the Commerce Department with a particular focus on large mergers and acquisitions. She holds a bachelor’s degree in journalism and in English.
-
Earn Delta SkyMiles Worth Up to $1,800 with an AMEX Business Card
Delta SkyMiles and American Express offer 150,000 on business credit card for new cardholders.
By Ellen Kennedy Published
-
Stock Market Today: Markets Soar Amid Strong Earnings for Big Tech
Equities ended the week on an up note thanks to some of the market's biggest names.
By Dan Burrows Published
-
Stock Market Today: Markets Soar Amid Strong Earnings for Big Tech
Equities ended the week on an up note thanks to some of the market's biggest names.
By Dan Burrows Published
-
Stock Market Today: Markets Tumble Amid Slower Economic Growth and Rising Prices
Disappointing readings on GDP and inflation helped tank equities.
By Dan Burrows Published
-
DraftKings Is a Top Analyst Pick Ahead of NFL Draft. Here's Why
DraftKings has posted a strong performance in 2024 but analysts think there is more upside for the stock. Here’s what you need to know.
By Joey Solitro Published
-
Meta Stock Slides as AI Spending Ramps Up: What To Know
Meta stock plunged after the Facebook parent increased spending on artificial intelligence and the metaverse.
By Joey Solitro Last updated
-
Stock Market Today: Stocks Run Out of Steam Ahead of Meta Earnings
The Dow Jones Industrial Average snapped a four-day winning streak after Boeing's first-quarter results.
By Karee Venema Published
-
TikTok Ban Passes Ahead of Meta Earnings: What To Know
Lawmakers voted in favor of banning social media platform TikTok just ahead of rival Meta Platforms' earnings report.
By Joey Solitro Published
-
Why Tesla Stock Is Soaring After a Q1 Earnings Miss
Tesla came up short of analysts' expectations for its first quarter, yet its stock is roaring higher today. Here's why.
By Joey Solitro Published
-
Stock Market Today: Nasdaq Soars Ahead of Tesla Earnings
The EV stock rose nearly 2% ahead of its highly anticipated Q1 earnings report, due after tonight's close.
By Karee Venema Published