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Federal Reserve Leaves Interest Rates Unchanged Amid Economic Uncertainty
The Federal Reserve on Wednesday announced that it will leave interest rates unchanged, leaving the benchmark federal funds rate at a range of 4.25% to 4.5%. This decision follows three consecutive interest rate cuts at the central bank’s most recent meetings, including a 50-basis-point cut in September as well as a pair of 25-basis-point reductions in November and December.
According to the Federal Open Market Committee (FOMC), the group responsible for guiding the Fed’s monetary policy, “recent indicators suggest that economic activity has continued to expand at a solid pace.” The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid, with inflation remaining somewhat elevated.
FOMC members were unanimous in their decision to leave rates unchanged at this time, but the committee is attentive to risks to both sides of its dual mandate. The statement added that the Fed will consider a range of information, including labor market data, inflation pressures, and expectations, as well as financial and international developments as it considers its next move.
Fed Chair Jerome Powell spoke at a press conference following the announcement, saying that a wide set of indicators suggest that conditions in the labor market are broadly in balance. The labor market is not a source of significant inflationary pressures, and inflation has eased significantly over the past two years but remains somewhat elevated relative to the Fed’s 2% longer-run goal.
Powell also addressed comments made by President Donald Trump, saying that he would “demand” lower interest rates. “I’m not going to have any response or comment whatsoever on what the president said. It’s not appropriate for me to do so. But the public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work and that’s how we best serve the public.”
Powell also fielded a question about how the Fed can reassure the American public that the central bank will continue to operate independently of politics. He emphasized that the Fed’s focus is on using data and analysis to guide its monetary policy decisions, saying, “Don’t look for us to do anything else. That will give us the best possible chance to achieve these goals for the benefit of the American people. That’s always what we’re going to do, and people should have confidence in that.”
