FEBRUARY 3, 2025 – FED LEAVES RATES ALONE AS INFLATION TICKS UP
The Federal Reserve met last week and left interest rates unchanged. They have entered a wait-and-see stance, choosing to see where inflation goes before acting. Fed Chair Powell pointed out that rates are much less restrictive now than they were a year ago. He is optimistic inflation will slow in the coming months.
The December personal consumption expenditures price index was released on Friday, the Fed’s preferred inflation measure. The PCE was up 2.6 percent, while the core PCE was up 2.8 percent. The data met expectations but remains ahead of the 2 percent target.
The tariffs imposed by the new administration remain wild card for the Fed. They could drive inflation expectations for both consumers and businesses. If people expect inflation, they will act differently in anticipation, which could drive up prices long before the tariffs take effect. No change in rates is expected until after the Fed’s meeting in March.