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United States Monetary Policy January 2025

United States: Central Bank leaves rates unchanged in January

Latest bank decision: At its meeting on 29 January, the Central Bank decided to maintain the target range for the federal funds rate at 4.25–4.50%.

Monetary policy drivers: The key domestic factors influencing the Central Bank’s decision to pause its easing cycle were likely a strong labor market; inflation moving further above the 2.0% target towards end-2024; and the threat of higher tariffs in the near term.

Policy outlook: The Central Bank’s forward guidance was data-dependent. Our Consensus is still for monetary easing to resume later this year. However, our panelists have revised up their forecasts since Trump’s election, and some now see rates on hold throughout 2025.

Panelist insight: Nomura analysts are among those adjusting their forecasts upwards:

“Despite a largely dovish press conference, Powell downplayed the likelihood of a cut at the March meeting. We no longer see a March cut as a likely outcome. We now expect policy to remain on hold through 2025. Easing is likely to resume in 2026.”

In contrast, Goldman Sachs analysts reiterated their call for cuts:

“We remain comfortable with our standing forecast that the FOMC will deliver two more 25bp cuts in June and December this year and one more in 2026. Over the course of the next few FOMC meetings, we expect year-on-year core PCE inflation to fall meaningfully and in a way that builds [the] confidence that Powell said he wanted to see.”

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