Today, the US Federal Open Market Committee (FOMC) has finally announced its first monetary policy decision of 2025. In a press release, the Federal Reserve announced that it will keep interest rates steady at the 4.25% to 4.5% range. This decision is in line with expectations.
All eyes are on Fed Chairman Jerome Powell’s press conference, especially in light of Donald Trump’s return to the White House, as media questions may focus on the potential impacts on the economy and the Fed’s future actions.
The Federal Reserve’s decision could be bearish for risky assets like cryptocurrencies. The hawkish stance from the Fed could make investors less inclined to invest in such assets.
The Fed has signaled a slowdown in interest rate cuts due to the strong performance of the American economy. However, this approach seems to clash with the policy stance of the newly-elected president, Donald Trump.
The Federal Reserve was expected to keep interest rates steady in the January meeting. While President Trump has pushed for an immediate rate cut, the Fed may hold off due to inflation concerns. Powell’s press conference will offer more clarity on future rate moves.
CME FedWatch data showed that there is a 99.5% probability of the Federal Reserve keeping rates unchanged at the current rate of 4.25% to 4.5%.
Notably, the Fed started lowering interest rates in late 2024, cutting by 50 basis points in September and again in November and December. More cuts of up to 50 basis points are possible, but will depend on economic slowdown and lower inflation.
Trump’s tax policies may boost the economy, but his trade tariffs and immigration restrictions could raise inflation and delay further rate cuts. With inflation still high and the economy doing well, the need for significant cuts is less urgent. Future Fed decisions may also hinge on the labor market and upcoming non-farm payroll data.
Inflation data for January 2025 will be released on February 12 at 8:30 AM ET, and markets will be closely watching, particularly as new AI companies like DeepSeek challenge Nvidia. Inflation, rate cuts, and AI will be key focuses for investors.
