US Fed Meeting: Holds Rates Steady Despite Inflation Pressure

The Federal Reserve has chosen to keep the target range for the federal funds rate steady at 4.25% to 4.50%, following its recent meeting of the Federal Open Market Committee (FOMC). The central bank's decision reflects a delicate balancing act amidst robust economic growth and ongoing inflationary pressures.

Economic Expansion and Inflation Challenges
According to the FOMC statement, the US economy continues to expand at a solid pace, supported by strong labor market conditions with a stable unemployment rate. However, inflation remains elevated, prompting the Committee to revise its inflation projection upwards to 2.7% by year-end, surpassing the 2% long-term target.

"Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid. Inflation remains somewhat elevated," FOMC statement read."The Committee seeks to achieve maximum employment and inflation at the rate of 2 per cent over the longer run. Uncertainty around the economic outlook has increased. The Committee is attentive to the risks to both sides of its dual mandate," it added.

Monetary Policy Adjustments and Economic Outlook
Acknowledging increased uncertainty in the economic outlook, the Federal Reserve emphasized its commitment to monitoring incoming data and risks closely. The central bank remains prepared to adjust monetary policy as needed to achieve its dual mandate of price stability and maximum employment.

Reduction in Asset Holdings and GDP Forecast Cut
In addition to holding rates steady, the Federal Reserve announced a reduction in its holdings of Treasury securities and agency debt. Moreover, the Fed revised its GDP growth forecast downwards to 1.7% for 2025, down from a previous estimate of 2.1%, indicating expectations of a cooling economy and slight uptick in unemployment.

Future Rate Cut Expectations
Despite maintaining current rates, the Federal Reserve reaffirmed its outlook for two interest rate cuts totaling 50 basis points by the end of 2025. This stance aligns with projections of economic moderation and easing inflationary pressures in the coming months.