Fed Holds Rates at 4.25%-4.50%, Signals Possible Cuts in 2025

The Federal Reserve left its benchmark interest rate unchanged at 4.25% to 4.50% after its December policy meeting, maintaining a cautious stance as officials continue to weigh progress on inflation against signs of economic resilience.

In its latest decision, the central bank said inflation remains a concern even as price pressures have eased from their peaks. Fed Chair Jerome Powell said policymakers need to see further evidence that inflation is moving sustainably toward the Fed’s 2% target before considering rate cuts. He added that reductions could begin in 2025 if disinflation continues.

The decision reflects the Fed’s effort to balance its dual mandate of controlling inflation while supporting employment and growth. Although recent data have suggested cooling inflation, officials appear unwilling to declare victory too early.

Financial markets welcomed the announcement. The S&P 500 rose 1.1% following the decision, while the dollar index strengthened modestly against major currencies. Investors interpreted the Fed’s message as signaling that borrowing costs may eventually ease, but not before policymakers gain greater confidence that inflation is firmly under control.

The central bank’s next moves will likely depend on upcoming inflation and labor market data, which could shape expectations for the timing and pace of any future cuts.