Fed holds rates at 4.75%-5.00%, hints at possible 2025 cuts as inflation cools

The Federal Reserve kept its benchmark interest rate unchanged at 4.75% to 5.00% after its December policy meeting, signaling that it remains cautious even as inflation shows further signs of easing. The decision reflects the central bank’s view that price pressures are moving in the right direction, while the broader economy continues to demonstrate resilience.

In remarks following the meeting, Chair Jerome Powell said the Fed could consider cutting rates in 2025 if inflation continues to trend toward the central bank’s 2% target. He emphasized that policymakers want to see sustained progress before shifting to a more accommodative stance.

The Fed’s latest move suggests it is balancing two priorities: keeping inflation on a downward path and avoiding unnecessary damage to growth and employment. Although inflation has cooled from its recent peaks, officials remain wary of declaring victory too soon.

Financial markets responded positively to the announcement. The S&P 500 rose 1.1% after the decision, while the dollar index edged lower. Investors interpreted the Fed’s tone as a sign that rate cuts may be on the horizon, even if policymakers are not yet ready to act.

The central bank’s next steps will depend on incoming data, particularly inflation readings and signs of economic slowing.