The Fed Holds Interest Rates Steady In Its First Decision Of The Year

The Federal Reserve held interest rates steady in its first decision of the year.

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• The Federal Reserve held interest rates steady in its first decision of the year.
• It follows pressure from Trump to continue cutting rates.
• The Fed also has two rate cuts penciled in for 2025, but that could change due to Trump's trade plans.

The nation's central bank held interest rates steady in its first decision of the year.

On Wednesday, the Federal Open Market Committee announced that it would be maintaining the Federal Reserve's target rate following a series of consecutive rate cuts at the end of 2024. This move was in line with market predictions that forecasted an all but certain pause on rate changes.

The Fed's pause comes just over a week into President Donald Trump's second term in the White House. Last week, Trump said during remarks at the World Economic Forum's annual event in Davos that he would "demand that interest rates drop immediately, and likewise, they should be dropping all over the world."

Fed Chair Jerome Powell said at recent press conferences that the central bank makes decisions based on data and operates independently of politics. Still, some of Trump's tariff policies could influence the decisions the Fed makes depending on how they impact the economy.

Trump, for example, recently said that he would consider placing tariffs on Canada, Mexico, and China as soon as February 1. Trade policy experts previously told Business Insider that new tariffs could boost US inflation. If price growth picks back up, the Fed might choose to raise interest rates later this year.

"We just don't know really very much at all about the actual policy, so it's very premature to try to make any kind of conclusion," Powell said in December.

The Fed's latest decision comes amid a strong US labor market; the economy added 256,000 jobs in December, beating economists' expectations, and the unemployment rate dropped to 4.1%.

While the positive economic data means the Fed likely won't feel urgent pressure to cut rates, the FOMC penciled in two interest-rate cuts for 2025 in December. As Trump's trade policies begin to be implemented, the Fed could change course and adjust its forecast.