Federal Reserve Stays Neutral
The Federal Reserve announced this week they were keeping interest rates at current levels. Their perspective is to wait and see regarding the impact of past interest rate cuts and whether or not they will be effective in helping economic growth.
We are not surprised about this decision and the bond market apparent apathy regarding the action announcement suggests that most market participants expected a cautious perspective by the Federal Reserve.
The risk of inflation remains. The question is whether or not past interest rate cuts will lead to higher prices. Higher prices occur when economic growth surges, which tends to impact prices. Combined with tariffs one can see the risks.
A recent NPR article outlined the latest rate action by the Fed. See excerpts below.
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“The Federal Reserve held interest rates steady Wednesday, as expected, despite pressure from President Trump for much lower borrowing costs.
The central bank has already cut its benchmark interest rate three times since September, making it cheaper to borrow money to buy a car, expand a business or carry a balance on a credit card. But with inflation still above target, most Fed policymakers voted to hold their target rate unchanged, in a range between 3.5 and 3.75%.
"The unemployment rate has shown some signs of stabilization," policymakers said in a statement. "Inflation remains somewhat elevated."
Fed governors Chris Waller and Stephen Miran dissented, saying they would have preferred to cut the benchmark rate by a quarter percentage point.”
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Source:
https://www.npr.org/2026/01/28/nx-s1-5690136/federal-reserve-interest-rates-jobs-labor-inflation
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