Zinger Key Points
- Fed holds rates steady at 4.25%-4.5%, ending streak of three consecutive cuts since September.
- Investors eye Powell’s 2:30 p.m. ET press conference for further policy signals.
- Get Wall Street's Hottest Chart Every Morning
Editor’s note: This story has been updated with additional details.
The Federal Reserve elected to keep interest rates unchanged at its Wednesday meeting, snapping a streak of three consecutive rate cuts that began in September.
The federal funds rate remains in a target range of 4.25% to 4.5%, with a unanimous decision from the committee. In December, the Fed lowered rates by 25 basis points, bringing the total cumulative cuts for 2024 to 100 basis points.
The FOMC statement from the January meeting indicated that “economic activity has continued to expand at a solid pace” and acknowledged that while inflation has moved closer to the 2% target, it “remains somewhat elevated.”
“The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance,” the statement added.
In its prior December projections, the Fed had upwardly revised 2025 inflation forecasts, expecting Personal Consumption Expenditures (PCE) inflation to rise to 2.5%, up from 2.1% in September. Core PCE inflation was also projected at 2.5%.
Echoing its December policy statement, which sparked investor concerns over a more hawkish stance, the Fed reiterated that “in considering the extent and timing of additional adjustments” to interest rates, “the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”
There were no changes to the pace of quantitative tightening. The Fed will continue reducing its holdings of Treasury securities, agency debt and agency mortgage-backed securities, as previously announced.
Investors now turn the focus to Fed Chair Jerome Powell‘s press conference.
Market Reactions
The decision to hold interest rates steady was widely expected by market participants, with both Fed futures and betting markets pricing in a near certainty of no adjustment.
Equity markets showed mixed reactions. The SPDR S&P 500 ETF Trust SPY fluctuated near the flatline by 2:05 p.m. ET, holding session losses at 0.6%. Small caps, tracked by the iShares Russell 2000 ETF IMW fell by 0.4%.
Shares of Nvidia Corp. extended their losses, plunging 6% in early afternoon trading in New York, as the Trump administration vowed to impose further chip export restrictions on China.
The U.S. dollar index, tracked by the Invesco DB USD Index Bullish Fund ETF UUP, edged higher by 0.2%, supported by the Fed's cautious tone on inflation.
Treasury yields moved slightly higher, with the policy-sensitive two-year yield inching up by 3 basis points to 4.24%.
Gold prices, as mirrored by the SPDR Gold Trust GLD, slipped 0.2%, while Bitcoin BTC/USD fell by 0.8%.
“We do not need to be in hurry to adjust our policy stance,” Powell stated during early remarks at his press conference.
Powell avoided answering questions about Donald Trump‘s interference in Fed policy after the president explicitly called for lower interest rates during an event in Davos last week.
Sector-wise the Real Estate SPDR Select Sector Fund XLRE was the day’s worst performer, extending losses to 1.3%.
Defensive sectors, like consumer staples and utilities, held broadly steady.
Read now:
Illustration of Federal Reserve Chair Jerome Powell created using artificial intelligence via MidJourney.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
