Fed holds rates steady, takes less confident view on inflation

cnbc.com:

The Federal Reserve held its key interest rate in check Wednesday, reversing a recent trend of easing policy as it examines what is likely to be a bumpy political and economic landscape ahead.

In a widely anticipated move, the central bank's Federal Open Market Committee left unchanged its overnight borrowing rate in a range between 4.25%-4.5%.

The decision followed three straight cuts since September 2024 worth a full percentage point and marked the first Fed meeting since frequent Fed critic Donald Trump assumed the presidency last week and almost immediately made known his intentions that he wants the central bank to cut rates.

The post-meeting statement dropped a few clues about the reasoning behind the decision to hold rates steady. It offered a somewhat more optimistic view on the labor market while losing a key reference from the December statement that inflation «has made progress toward» the Fed's 2% inflation goal.

«The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid,» the new language read. «Inflation remains somewhat elevated.»

Investors will be keyed into comments from Chair Jerome Powell at a news conference at 2:30 p.m. ET for more nuance.

A stronger labor market and stubborn inflation would provide less incentive for the Fed to ease policy. The statement again indicated that the economy «has continued to expand at a solid pace.»

Recent statements from policymakers have shown some apprehension about whether progress in bringing down inflation has stalled. Officials also have said they want to see how the previous cuts are working their way through the economy though most expect rate reductions this year.

In addition, the decision comes