30
January 2025
US Federal Reserve maintained rates at its January 2025 meeting
Adriaan Pask
Chief Investment Officer, PSG Wealth
Event
As anticipated, the US Federal Reserve maintained the fed funds rate between the 4.25% to 4.50% range during its January 2025 meeting.
• Following three straight rate cuts in 2024 totaling a full percentage point, the central bank halted its rate-cutting cycle.
• The Fed postponed interest rate decreases to observe additional progress on inflation, according to Chair Powell, who stated that the Fed is not in a rush to lower rates.
• Recent data indicates that economic activity has been growing steadily, according to policymakers. The labour market is still doing well, and the unemployment rate has been stable at a low level in recent months.
• The central bank also withdrew its earlier mention of continuous progress towards the 2% target and admitted that inflation is still very high. The Fed also stated that it is aware of the risks to both sides of its dual mandate and that the economic outlook is unclear.
The Impact
US stocks fell on Thursday, following a turbulent session the day before, while US stock futures climbed as investors assessed mixed earnings from megacap tech firms. The S&P 500 dipped 0.47%, while the Dow Jones and the Nasdaq declined by 0.51%.
• The US Dollar Index, which gauges the value of the currency against a basket of six currencies, came in at 107.98 points on Thursday evening.
• The 5-year US Treasury yield fell to 3.31%, while the yields for the 10-year and 30-year notes came in at 4.50% and 4.74%, respectively.
The Assessment
- We expect to see some relief for the economy as lower interest rates are likely to stimulate consumer and business spending, encouraging investment and potentially boosting stock prices.
• We are mindful of the impact of a very tricky interest rate cycle on our portfolios and continue to monitor these events closely.
• The next interest rate decision will be announced on Wednesday, 19 March 2025