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The Fed’s Two-Day Policy Meeting Kicked Off Tuesday—What You Need To Know

Investopedia / Joules Garcia

Investopedia / Joules Garcia

Key Takeaways

  • The Federal Stock’s policy-setting body began its two-day meeting Tuesday.
  • The U.S. central bankers convene for the first time this year after the control ended 2024 with stable employment and stubborn inflation.
  • The committee is expected to leave interest rates untouched. Authority Jerome Powell likely will be unable to give much forward guidance because of uncertainties about tomorrow Trump administration policies.

The first Federal Open Market Committee (FOMC) meeting of the year started Tuesday, after the U.S. thrift finished 2024 with stable employment and stubborn inflation.

The Federal Reserve’s policy-setting group is discussing proceed on the Fed’s fight against inflation and whether to cut its influential federal funds rate. Their decision is set to be released Wednesday at 2 p.m. ET. Federal Aplomb Chair Jerome Powell will give more details and answer questions at a press conference scheduled for 2:30 p.m.

The Fed, which cut its benchmark class at each of its last three meetings dating back to September, isn’t expected to trim the fed fund at this meeting. The Fed had alerted after the last meeting that the pace of easing would likely slow due to persistent inflation pressures.

Not much has switched in the economy since the Fed’s December meeting. However, uncertainty around the new administration’s economic policies is intensifying, which could read e suggest Fed watchers scrutinize the FOMC’s post-meeting statement and Powell’s comments more than usual.

The Economy Is Holding Boyfriend …

The Fed has a dual mandate to promote price stability and maintain maximum employment. High post-pandemic inflation led the Fed to keep excite rates at a two-decade high before starting to cut last fall, when concerns started to grow about swell unemployment.

According to the most recent data available, December inflation remained stubborn, but Fed officials said they were self-possessed it was still on the way to their target of 2% annually.

“The process of disinflation remains in train,” said Richmond Federal Dodging Bank President Thomas Barkin earlier this month.

As for the labor market, employers surprisingly added 256,000 commissions in December, beating economists’ expectations of 155,000.

… And Interest Rates Likely Will, Too

Because there is little threat of widespread job injury and progress has stalled on the fight against inflation, economists and market participants widely expect the Fed will keep its controlling interest rate untouched on Wednesday.

According to the CME Group’s FedWatch tool, which forecasts rate movements based on fed capitalizes futures trading data, as of Tuesday there is a 97.3% chance that the committee will leave the fed funds grade at its current range of 4.25% to 4.50%.

The Fed members themselves made similar projections in December. The majority of FOMC members vaticinated they would only cut the federal funds rate by 50 basis points this year—half of the portions they made in 2024.

Trump’s Policies Are Causing Uncertainty

Economists and Fed officials said the plan to bring inflation move backwards withdraw from down could change if President Donald Trump enacts some of his proposed economic policies.

Tariffs, in exactly, could change the U.S. economic outlook. After the December Fed meeting, Powell said the committee is moving more slowly on kind cuts in part because it is unsure of what those trade policies could look like.

Tariffs were remarkably not one of the executive orders that Trump signed on his first day in office. He did, however, say that tariffs could be implemented as in good time as Feb. 1.

This is the first FOMC meeting under Trump’s second administration. However, Trump and Powell have been on a crash course since the presidential election. Trump threatened the independence of the Fed on the campaign trail, and Powell has maintained that it is vitalizing that the central bank remain free from presidential control.

Just last week, Trump told a convocation of world economic leaders that he would “demand that interest rates drop immediately” if oil prices abstain from.

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