Fed Set to Pause Rate Cuts as Unity Returns Among Policymakers
Fed widely expected to keep rates unchanged amid cooling labor market and sticky inflation.
The Federal Reserve is poised to hold its benchmark interest rates steady at 3.5%–3.75% this week, marking the first pause after three consecutive cuts that totaled 1.75 percentage points since September 2024. Analysts and economists view this decision as a near-certain outcome, with broad backing from FOMC members who see the current range as well-balanced to address both employment risks and persistent inflation above the 2% target. The move comes as the labor market shows signs of stabilization—unemployment dipped to 4.4% in December—and economic growth proved stronger than anticipated in late 2024.
This gathering offers a rare moment of consensus following months of internal debate. Earlier cuts drew support from officials focused on bolstering a softening jobs picture, while a vocal minority urged caution over lingering price pressures. “It’s kind of like a ‘Kumbaya’ moment,” noted Tim Duy of SGH Macro Advisors, suggesting policymakers can now take a collective breather and reassess based on incoming data. Several key voices, including Governor Christopher Waller—who first signaled openness to easing last summer—now see “no rush” to cut further with inflation still elevated.
The January meeting also features a rotation of voting regional presidents, adding fresh perspectives: Cleveland’s Beth Hammack and Dallas’s Lorie Logan have repeatedly flagged inflation risks, Philadelphia’s Anna Paulson remains more concerned about labor conditions, and Minneapolis’s Neel Kashkari has already endorsed holding steady this time. While a handful of doves, such as Governor Stephen Miran and possibly Michelle Bowman, may dissent in favor of deeper reductions, the overall tone points to widespread comfort with the status quo.
Also Read: Trump Says He Would ‘Love to Fire’ Fed Chair Powell, Urges Resignation
Market attention will zero in on Chair Jerome Powell’s post-decision press conference at 2:30 p.m. ET Wednesday. With no new economic projections released, Powell’s remarks will carry extra weight in signaling the likely duration of any pause. Economists expect only minor tweaks to the policy statement—perhaps a nod to the improved unemployment figure and robust late-2024 growth—while investors hunt for clues on fiscal stimulus impacts and tariff policy effects.
Powell’s appearance arrives amid heightened scrutiny of the Fed’s independence. This marks his first public comments since the Department of Justice issued grand jury subpoenas to the central bank and the Supreme Court weighed arguments over another governor’s potential removal. Questions about political pressures and Powell’s post-May chairmanship plans—his board term runs through 2028—are almost certain to surface, though he has consistently sidestepped personal-future queries in the past. The pause, if confirmed, could still stir reactions from the White House, which has already intensified criticism of Powell’s approach.
Also Read: US, Japan, Australia Among Nations Wishing India on 77th Republic Day
