The Fed maintained its benchmark rate yesterday at a range of 3.75%-4.0%, its lowest rate since November 2022. At the end of 2025, the Fed showed an aggressive stance, cutting rates three consecutive times.
The decision was widely expected and carried in a 10-2 vote. Historically, Fed rate decisions have been unanimous but we are seeing a new trend of split votes. At Wednesday’s meeting, Fed member Stephen Miran, an appointee of President Trump, voted for a quarter-point cut, as did Chris Waller, another Trump appointee whose name has been mentioned as a possible candidate for the Fed Chair position.
Powell Upbeat About Growth
The rate statement and the Fed Chair Powell’s press conference pointed to some optimism about the US economy. At the December meeting, members said that “downside risks to employment rose in recent months” but removed that line in yesterday’s statement. Members noted that economic activity was expanding at a “solid pace” and that the unemployment rate had shown “some signs of stabilization”. Still, members noted their concern about inflation , which they said remains “somewhat elevated”.
At his press conference, Powell strongly hinted that the Fed could continue to pause for some time, saying that he doesn’t think that the current policy is “significantly restrictive”. In other words, the economy is holding up just fine and there is no need to keep lowering rates. The markets expect the Fed to remain on auto-pilot as they have not priced a rate cut until the summer.
Who Will Take over After Powell?
Powell did not discuss his fight with President Trump, who has made no secret his desire for the Fed to aggressively lower rates. Still, Wall Street is carefully following the search decision for a new Fed chair. Powell will remain in charge for only two more meetings and Trump has said he will announce his Fed chair nominee shortly.
US Dollar, Stock Market Steady after Rate Decision
The US Dollar didn’t show much reaction to the Fed’s decision to hold rates. Most of the major currencies showed little change against the greenback, with the exception of the AUD/USD currency pair, which continues to rally and is up 0.48% on Thursday, trading at 0.7073.
US stock indices showed limited movement on Wednesday in response to the Fed’s rate decision.
The S&P 500 Index hit as milestone on Wednesday, climbing above the 7,000 mark before pulling back and closing the day almost unchanged at 6,978.
The Nasdaq 100 Index rose slightly, gaining 40 points (0.17%) and closed at 23,857.
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