New Delhi [India]: The Federal Open Market Committee (FOMC) remains committed to its dual mandate of achieving maximum employment and maintaining stable inflation at 2 per cent, as reflected in the minutes of its latest meeting.
In its most recent decision, the FOMC opted to keep interest rates unchanged, signaling that a rate cut is not imminent. The Federal Reserve maintained the target range for the federal funds rate at 4.25 per cent to 4.50 per cent. Additionally, the Board of Governors unanimously voted to keep the interest rate on reserve balances at 4.4 per cent and the primary credit rate at 4.5 per cent, effective January 30, 2025.
Despite steady economic growth, policymakers remain cautious about monetary easing. Consumer spending remains strong, driven by real wage growth, a resilient labor market, and stable household finances. The unemployment rate has stayed low, reinforcing confidence in labor market conditions. However, inflation remains slightly elevated, prompting a careful approach to future policy adjustments.
Dallas Fed President Lorie Logan emphasized, “Lower inflation alone does not necessarily justify further rate cuts.” She highlighted the importance of evaluating broader economic conditions before making any policy changes.
The Committee acknowledged that risks to employment and inflation goals are balanced, though economic uncertainty persists. Officials pledged to closely monitor economic data and adjust policies if necessary to maintain stability.
Following a 100 basis points (bps) rate cut in 2024, the Fed appears poised to start 2025 without further adjustments. The FOMC convened on January 28 and will conclude discussions on January 29.
According to the report, the labor market showed improvement in late 2024, with consistent hiring and a stable unemployment rate. Earlier concerns about a slowdown in job growth have diminished. The FOMC may emphasize these positive trends in its policy statement.
While inflation has been gradually declining, core inflation remains around 3 per cent—still above the Fed’s 2 per cent target. With the U.S. economy growing at a steady 2.5 per cent rate, the decision to keep interest rates unchanged seems justified for now.
The next FOMC meeting is scheduled for March 18-19, 2025, when officials will reassess economic conditions and determine the future course of monetary policy.