Fed keeps interest

At the end of the first policy session of 2025, on January 29, the Fed announced that the reference interest rate kept at 4.25-4.5%. Previously, the agency had reduced interest rates 3 times in a row from September 2024.

Fed officials are waiting for the process of cooling inflation to progress. This process shows signs of slowing down from the end of last year. The agency also abandoned the comment “inflation has progressed” which was used in previous notices.

This move matches the previous market forecast. However, it can also increase tensions between Fed and US President Donald Trump. Since the election, Mr. Trump has expressed his desire to have a voice to the decisions of this agency.

Fed officials recently confirmed that they are still confident that inflation will be 2%, but cannot soon declare the victory. Fed President Jerome Powell said it would reduce interest rates, if the labor market suddenly weakened, or inflation “faster faster than forecast”. “We do not need to rush to adjust,” he said.

However, the market believes that Fed’s plan may change if Mr. Trump keeps the commitment to imposing 25% import tax to Mexico and Canada on February 1. These are the two leading US trading partners. Economists are warning of import taxes, along with the policy of immigration and increased domestic crude oil production, which can blow inflation in the United States.

Last week, at the World Economic Forum (WEF) in Switzerland, Mr. Trump said that when oil prices fell, he would “ask for interest rates immediately.” In a press conference on January 29, when asked about this issue, Powell said “no comments”.

He said that he had never contacted Trump since the US President took office. Last week, Mr. Trump said he would talk to Powell “when appropriate”. The Fed President also affirmed that this agency will continue to operate independently, based on the data. “Don’t expect us to do anything,” he said.

Immediately after the Fed’s press conference, Mr. Trump immediately went to the Truth Social social network criticizing the agency. He said that the Fed “could not prevent the inflation problem they created” and “Bank management very badly”. The US President affirmed that his policies would overcome these issues, which included promoting fossil energy production and changing US trade relationships.