WASHINGTON — In a recent meeting, officials from the Federal Reserve expressed concerns about potential inflation risks, which influenced their decision to maintain the current benchmark interest rate.
The minutes from the gathering held on January 28-29, which were made public on Wednesday, revealed that factors such as President Donald Trump’s suggested tariffs, large-scale migrant deportations, and sustained consumer spending could contribute to rising inflation levels this year.
The 19 voting members of the Fed indicated that they preferred to see significant advancements in curbing inflation before contemplating any further interest rate reductions. They decided to keep the key interest rate steady at 4.3%, following a previous cut from a two-decade high of 5.3% late last year. This decision suggests that consumers may not experience a decrease in borrowing costs for loans, including mortgages, auto loans, and credit cards, in the near future.
Recent government data has shown a worrying trend, with inflation figures indicating worsening conditions, leading many economists to predict that there will only be one rate cut this year, if any at all. According to the Labor Department, consumer prices rose by 3% in January compared to the previous year, marking an uptick from a low of 2.4% noted in September. It is important to note that the Federal Reserve closely monitors a different measure of inflation, which currently reflects a rate of about 2.5%.
The minutes highlighted a significant level of uncertainty regarding the economy, which prompted the Fed to take a cautious stance when considering any alterations to the interest rate.
Every policymaker at the Fed backed the decision to maintain the interest rate, reflecting a consensus amid some recent divisions between those advocating for cuts and those focused on persistent inflation concerns.
A major question among Wall Street investors is how long the Fed will continue to hold off on rate cuts. Current futures prices suggest that the central bank may not implement any reductions before July, and they do not expect another cut to occur until 2026.
Furthermore, several Fed officials are keen to observe the economic impacts resulting from Trump’s proposed tariffs and immigration policies. While many economists predict that the tariffs will lead to increased inflation, some argue that the president’s intent to reduce regulations could eventually lower consumer prices.
On Monday, Fed Governor Christopher Waller addressed an audience in Australia, stating that he still anticipates interest rates to decrease this year but supports the current decision to pause. Waller mentioned that if the recent inflation rise turns out to be a temporary anomaly, much like it was in January 2024, then rate cuts may be warranted later in the year.
Waller expressed his belief that new tariffs would not dramatically affect inflation and noted that any price hikes would likely be short-lived. Thus, he concluded that the Fed does not need to adjust its policies based solely on announcements of tariffs.
“I haven’t altered my outlook based on what has been implemented to date,” Waller stated regarding the tariff initiatives proposed by Trump.
