Federal Reserve Holds Interest Rates

The Federal Open Market Committee (FOMC) today voted to hold rates at a range of 3.5%-3.75% pa by a majority of 10:2.  This followed three rate cuts in 2025.

Fed Chair, Jerome Powell said that it was “Hard to look at the date and say that policy is significantly restrictive right now”.  In short, a justification to his critics, such as President Trump, that keep rates on hold is not restricting economic growth and activity in the US right now.

• Job growth is up at present. 
• Tariffs are encouraging smaller US businesses to develop domestic market product and services rather than exporting as well as reduced imports creating demand in the US for US goods.
• US inflation climbed in December by 0.1% to 2.7%, but there were significant gaps in economic data due to federal government shutdown.

All the above point to the US Fed holding steady for their target to 2% inflation.

That said, Powell time is up.  The Federal Reserve Chair is selected by the President.  President Trump’s ‘chosen one’ is likely to be Kevin Warsh, currently a Fed critic of being too cautious, a Wall Street veteran and former member of the Federal Reserve Board of Governors.

Comment

Professionally, we believe Powell has steered the Fed well and helped the US through some very difficult periods.  He joined the board in 2014 and became Chair in 2018.  Technically his term does not have to end until 2028 but it will end in May 2026.

We like a steady hand and we hope Kevin Warsh, assuming he is nominated by Trump and appointed as Chair, will continue in the same vain.