Jan. 29 (UPI) — The Federal Reserve on Wednesday kept interest rates unchanged, bypassing a trend of dropping cuts and bucking President Donald Trump‘s wishes amid uncertain economic times.
The central bank’s Federal Open Market Committee, a policymaking body at the Fed, kept the overnight borrowing rate in a range of 4.25% to 4.5%. Mortgages, car loans and credit card rates are tied to the federal funds target rate.
The Fed had decreased the rate three time since September 2024, when it dropped a half point, for a full percentage point. Wednesday was the first Fed meeting since Donald Trump, who has frequently criticized the Fed, became president again last week.
The Fed’s next meeting is in March, and the Fed seems unlikely to lower rates then.
The Dow Jones Industrials later closed lower by 138.83 points, or 0.31%, to 44,713,83. The S&P 500 closed lower by 0.47% to 6,039.31 and the Nasdaq Composite was down 0.51% to 19,632.32.
When the Fed indicated last month that it would cut interest rates at a slower pace, stock prices plummeted but them recovered the losses.
The Fed gave a healthy view of the economy.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the Fed said in a statement. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
In December, the U.S. economy added an estimated 256,000 jobs and the unemployment rate dipped down to 4.1% from 4.2%.
In December, the inflation rate in the United States was 2.9% compared with 2.7% reported in November.
The Fed has sought to keep inflation at 2%, which is down sharply from the 40-year peak it hit in mid-2022 when it was 9.1%. The Federal Reserve rate then was 1.2%.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the Fed said. “The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”
The Fed looked at future changes.
“By keeping rates at the target rate, In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the Fed said. “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”
The Fed said it will look “readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”
All 12 Federal Open Market Committee members approved the decision, including Chair Jerome Powell.
Powell said during a news conference the labor market has not been a significant source of inflationary pressure. He said the central bank wants “real progress on inflation or some weakness in the labor market before we consider making adjustments.”
He said it was “inappropriate” to respond to Trump’s call for lower rates.
“The public should be confident that we’ll continue to do our work as we always have,” said Powell, who said he hasn’t spoke with Trump recently.
Trump during a virtual speech to the World Economic Forum in Davos, Switzerland, last week, demanded a drop in interest rates after seeking reduction of oil prices set by a group of nations known as OPEC, which includes Saudi Arabia. The United States doesn’t belong to OPEC.
After Trump was re-elected in November, Powell said he wouldn’t resign from his position if asked by Trump. And he said it’s “not permitted under the law” for him to be fired.
Powell said banks are well-funded and households generally “are in pretty good shape financially these days.”
But he said predicting the future is tough with Trump as president.
“I think the committee is very much in the mode of waiting to see what policies are enacted,” Powell said. “We don’t know what will happen with tariffs, with immigration, with fiscal policy and with regulatory policy. We are only just beginning to see and actually are not beginning to see much. I think we need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”
On Feb. 1, Trump is planning to impose 25% tariffs on products imported from Canada and Mexico.
According to FactSet, more than 90% of economists they polled expected the Fed to keep interest rates where they are not only at this meeting but at the March 19 meeting, as well.