Federal Reserve holds interest rates steady as inflation remains above 2%

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Source: CBS News

MoneyWatch
Federal Reserve holds interest rates steady as inflation remains above 2%

By Aimee Picchi
Edited By Alain Sherter, Anne Marie Lee
January 29, 2025 / 2:01 PM EST / CBS News

The Federal Reserve said Wednesday that it will leave its benchmark rate unchanged, hitting the brakes on lowering borrowing costs for individuals and businesses after a flurry of rate cuts starting last fall.

The Fed said it will maintain the federal funds rate at its current range of 4.25% to 4.5%. The decision comes after the central bank trimmed rates three times starting in September 2024, which has pushed down the federal funds rate — the rate banks charge each other for short-term loans — by one percentage point.

The pause, the Fed's first rate decision since President Trump returned to office on Jan. 20, comes as economists predict the central bank is likely to take a wait-and-see approach to the president's economic policies, given that some, such as higher tariffs, could prove inflationary.

The Fed's decision to keep rates steady reflects stubborn U.S. inflation, which remains close to 3% on an annual basis. That has fueled concerns that additional rate cuts could reignite price increases, making it more difficult to get to the Fed's 2% target. ... "After undertaking three interest rate cuts in last four months of 2024, the Federal Reserve has decided to pump the brakes,"Joe Gaffoglio, CEO of Mutual of America Capital Management, said in an email.

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Read more: https://www.cbsnews.com/news/federal-reserve-fomc-meeting-today-interest-rates-decision-january-2025/