Fed Holds Rates Steady, Signals No Cuts in 2025 as Inflation Stays Sticky

The U.S. Federal Reserve left interest rates unchanged at 4.25% to 4.50% at its latest policy meeting, reinforcing its cautious stance as inflation remains above the central bank’s 2% target. Officials signaled that no rate cuts are likely in 2025, citing persistent price pressures and a resilient economy.

Fed Chair Jerome Powell said the combination of solid economic growth and a strong labor market gives policymakers room to keep monetary policy restrictive for longer. He noted that while inflation has eased from its peak, progress has been uneven and not yet sufficient to justify easing borrowing costs.

The decision underscores the Fed’s determination to avoid cutting rates too soon and risking a renewed acceleration in prices. Investors had been watching closely for any sign that policymakers might begin preparing for lower rates later this year, but the latest guidance suggests the central bank remains focused on restoring price stability.

Financial markets reacted modestly to the announcement. The S&P 500 fell 0.5% as traders adjusted expectations for future policy easing, while the dollar index rose 0.3% against major currencies, reflecting continued support for the U.S. currency from higher-for-longer interest rates.