Fed Chair Powell Signals No Rush to Cut Interest Rates in 2025/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Federal Reserve Chair Jerome Powell signaled that interest rates will remain steady, citing persistent inflation and a strong job market during his testimony before the Senate Banking Committee. While the Fed cut rates by a full percentage point in late 2024, Powell stressed that there is no urgency for further reductions. His remarks come as the Trump administration’s trade policies and spending cuts create new economic uncertainty. Wall Street is now predicting fewer rate cuts in 2025, with some economists forecasting just one reduction this year—if any.
Powell: Fed Holding Rates Steady Amid Economic Uncertainty – Key Takeaways
Interest Rate Outlook
- Fed Chair Jerome Powell signaled no immediate rate cuts, citing strong economic conditions and persistent inflation.
- The Federal Reserve lowered rates by 1% in late 2024, but Powell says further cuts are not urgent.
- Wall Street now expects fewer rate cuts in 2025, with some analysts predicting just one cut—if any.
- Holding rates higher could mean prolonged borrowing costs for mortgages, credit cards, and auto loans.
Trump Administration’s Policies & Economic Uncertainty
- Powell did not mention Trump’s economic policies directly, but the administration’s actions create new risks:
- 25% tariffs on steel and aluminum could drive inflation higher.
- Proposed spending cuts could impact economic growth and employment.
- Migrant deportations could disrupt labor markets, affecting supply chains.
- Economists are divided on whether Trump’s policies will raise or lower inflation.
Strong Job Market Reduces Urgency for Rate Cuts
- The unemployment rate fell to 4%, signaling a healthy labor market.
- Job growth remained steady, reducing pressure on the Fed to ease rates.
- Hiring in late 2024 was revised significantly higher, boosting confidence in economic stability.
Fed’s Policy Review & Inflation Target
- The Federal Reserve is conducting a review of its policy tools but will not change its 2% inflation target.
- Some economists believe the Fed’s previous approach was too slow in responding to inflation in 2021-2022.
- Powell insists the Fed must first bring inflation back to 2% before considering any target adjustments.
Wall Street & Market Reactions
- Morgan Stanley predicts just one rate cut in 2025, down from the Fed’s previous projection of two.
- Bond markets show rising Treasury yields, reflecting investor uncertainty.
- Higher rates could impact stock valuations, especially in high-growth sectors.
What to Watch Next?
- Upcoming inflation reports will determine how soon the Fed might cut rates.
- Trump’s trade policies and their impact on inflation and economic stability.
- Congressional budget battles over spending cuts that could affect growth and hiring.
- Potential shifts in Powell’s tone at future Fed meetings based on economic data.
Powell’s message: The Fed is in no rush to cut rates, and economic uncertainty remains high.
Powell: No Urgency for Rate Cuts as Fed Navigates Inflation and Trade Uncertainty
Fed Holds Firm on Interest Rates
Federal Reserve Chair Jerome Powell told Congress Tuesday that the Fed is in no hurry to cut interest rates, citing a strong job market and persistent inflation.
“With the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said in his prepared testimony to the Senate Banking Committee.
While the Fed slashed rates by a full percentage point late last year, Powell made it clear that further reductions are not imminent.
Trump Administration’s Trade and Fiscal Policies Add Uncertainty
Powell did not directly address the Trump administration’s economic policies, but his remarks come as the White House:
- Imposes new tariffs on steel and aluminum, sparking fears of inflation.
- Pushes for aggressive spending cuts, which could impact economic growth.
- Faces criticism over mass migrant deportations, which some economists warn could disrupt labor markets.
Economists are divided on how Trump’s policies will impact inflation:
- Tariffs and deportations could drive prices higher, increasing pressure on the Fed.
- Deregulatory moves could expand supply, lowering inflation in some areas.
“The Fed’s interest rate is well positioned to deal with the risks and uncertainties that we face,” Powell stated.
Wall Street Expects Fewer Rate Cuts in 2025
At the Fed’s December meeting, policymakers projected two rate cuts in 2025. However, Wall Street is growing skeptical:
- Morgan Stanley now predicts just one cut this year.
- Futures markets expect a single rate cut in July—if any at all.
Why fewer rate cuts matter:
- Higher borrowing costs for mortgages, auto loans, and credit cards could persist longer.
- The stock market could face headwinds, as lower rates typically boost equities.
- Housing affordability could remain a challenge, as mortgage rates stay elevated.
Strong Job Market Reduces Pressure for Rate Cuts
The Fed’s cautious approach comes amid a healthy labor market:
- Employers added a solid number of jobs in January.
- The unemployment rate dropped to 4%, a historically low level.
- Hiring revisions for November and December were significantly higher than initially reported.
“Steady hiring suggests less urgency for the Fed to reduce borrowing rates,” analysts at Bank of America noted.
Last September, the Fed implemented a surprise half-point rate cut after weaker summer hiring fueled fears of recession. But with the job market stabilizing, such emergency moves are less likely.
Fed’s Policy Review: No Plans to Change 2% Inflation Target
Powell also announced that the Fed is conducting a second review of its policy strategies, focusing on:
- How to improve communication about its decisions.
- Ensuring policies remain effective in a changing economy.
However, the Fed will not raise its 2% inflation target, despite some economists arguing that it is too low for modern economic conditions.
“We shouldn’t change the target while we’re still struggling to get inflation down to 2%,” Powell emphasized.
This follows criticism that the Fed was too slow to respond to inflation in 2021 and 2022, allowing prices to rise unchecked.
What’s Next for Interest Rates?
Key Factors That Could Influence Fed Policy
- Upcoming inflation reports will be closely watched to see if price pressures ease or remain stubborn.
- Trump’s trade policies—new tariffs and trade disputes could increase inflation risk.
- Congressional battles over spending cuts could affect economic growth and employment.
You must Register or Login to post a comment.