Chair Powell: The Fed will keep its inflation goal

The Federal Reserve held its key interest rate steady on Wednesday, maintaining the Federal Funds Target Range at 4.25% to 4.50%. This decision aligns with market expectations and follows a 25-basis-point rate cut in December. The Fed continues to grapple with balancing economic growth and inflation control.  

The Fed’s announcement on Wednesday indicated no immediate plans for further rate cuts. While acknowledging that inflation remains above its target, the Fed highlighted continued economic growth and low unemployment.  

The Fed’s policy statement acknowledged a recent plateau in inflation data. It removed previous language suggesting progress towards the 2% target, instead stating that price increases “remain elevated.” The Fed expressed confidence in future inflation reduction but emphasized the need to pause and gather more data.

The statement also noted robust economic activity, with a stable low unemployment rate and a strong labor market. The Federal Open Market Committee (FOMC) indicated that future interest rate adjustments will be data-dependent, reflecting a cautious and data-driven approach.  

Following the Fed’s decision, the US Dollar strengthened, surpassing the 108.00 level. This move tested recent highs, anticipating Chair Jerome Powell’s press conference.

Following is a set of key highlights from Fed Chair Jerome Powell’s press conference post the decision by FOMC to keep the US interest rate unchanged in January 2025.

Key Highlights:

Economy has made significant progress toward goals.

Inflation has moved much closer to goal, somewhat elevated.

2024 GDP looks to have risen above 2%.

Investment in equipment appears to have slowed.

Labor market conditions solid.

Unemployment rate has stabilized, remains low.

Labor market conditions broadly balanced.

Labor market not a source of inflationary pressures.

Labor market not a significant source of inflation.

Total PCE rose 2.6% in 12 months to December, core PCE rose 2.8%.

Risks to achieving goals roughly in balance.