Federal Reserve Holds Interest Rates Steady

(Reuters) – The Federal Reserve left interest rates in the 4.25% to 4.50% target range on Wednesday, providing little insight into future easing. Inflation remains above target, economic growth continues, and the unemployment rate is low.

After several months of sideways inflation data, the U.S. central bank removed language from its latest policy statement indicating that inflation “has made progress” towards the 2% goal.

The Fed is now in a holding pattern, awaiting further inflation and job data, along with clarity on the impact of President Trump’s policies.

Market Reaction:

• Stocks: The S&P 500 initially declined before reversing, closing down 0.45%.
• Bonds: The yield on benchmark U.S. 10-year notes rose to 4.593% before paring back to 4.573%. The 2-year note yield rose to 4.263% before decreasing to 4.236%.
• Forex: The dollar index extended gains before easing to an increase of 0.06%, while the euro fell 0.11%.

Comments:

George Cipolloni, Portfolio Manager, Penn Mutual Asset Management, Philadelphia
“The statement is being interpreted as more hawkish than expected. It’s wise for the Fed to wait and see regarding inflation.”

Rusty Vanneman, Chief Investment Strategist for Orion, Omaha, Nebraska
“Keeping rates steady was the right call. The economy is stable but inflation remains a concern.”

Michael Rosen, CIO at Angeles Investments, Santa Monica, California
“The bond market’s sell-off followed the Fed’s removal of optimistic inflation language. The market had wrongly anticipated significant easing.”

Ellen Hazen, Chief Market Strategist, F.L. Putnam Investment Management, Lynnfield, Massachusetts
“The market predicted the Fed’s flat stance correctly. The new language indicates a hawkish shift regarding labor and inflation stability.”

Brian Jacobsen, Chief Economist, Annex Wealth Management, Menomonee Falls, Wisconsin
“The Fed seems to believe the economy is stuck at low unemployment with high inflation.”

Matthias Scheiber, Head of Multi-Asset Solutions Team, Allspring Global Investments, London
“We don’t expect rate reductions until at least May. The Fed will likely be cautious under the new administration.”

Michele Raneri, Head of U.S. Research and Consulting, TransUnion, Chicago
“The Fed opted to hold rates steady for the first time since July 2024 amid strong economic indicators.”

Michael Brown, Senior Research Strategist, Pepperstone, London
“The Fed’s removal of the ‘progress’ language isn’t a game-changer but suggests further disinflationary progress is needed.”

Lindsay Rosner, Head of Multi Sector Fixed Income Investing, Goldman Sachs Asset Management, New York
“Strong growth and resilience in labor data allow for a patient approach from the Fed.”

Joseph Sroka, Chief Investment Officer, Novapoint, Atlanta
“The Fed was expected to keep rates unchanged. The new administration influences their wait-and-see approach.”

Jamie Cox, Managing Partner, Harris Financial Group in Richmond
“The Fed indicated no March rate cut, shifting focus from inflation trajectory to economic growth.”

Mark Luschini, Chief Investment Strategist, Janney Montgomery Scott, Pittsburgh, PA
“Rates remained unchanged as the Fed acknowledges inflation above its target, but no surprise in the decision.”

Guy Lebas, Chief Fixed Income Strategist, Janney Montgomery Scott, Philadelphia
“The Fed acknowledges slower rate reductions with strong growth and slightly elevated inflation readings affecting their pace.”

Summary: The Federal Reserve held interest rates steady, signaling caution amid strong economic indicators and elevated inflation, while awaiting further data and new administration policies.