Despite facing pressure from the Trump administration, Federal Reserve Chair Jerome Powell announced that interest rates will remain unchanged as concerns remain over inflation and the job market.
After increasing interest rates to their highest levels in decades in 2023, the Federal Reserve started easing interest rates in September 2024 as annual inflation rates began stabilizing below 3%. The Federal Reserve implemented two additional rate drops in late 2024.
But lately, the annual consumer inflation rate has crept slightly higher, causing the Federal Reserve to pause any additional rate cuts. The Federal Reserve noted that the job market remains strong, another key determining factor in whether to adjust interest rates.
Powell has said the Federal Reserve is trying to balance the need to reduce inflation while preventing the labor market from being stifled. In recent cases when interest rates increased, like they did in 2000 and 2007, a recession followed.
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"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," the Federal Reserve said.
During last week's World Economic Forum, President Trump said, "I’ll demand that interest rates drop immediately, and likewise, they should be dropping all over the world.”
The consumer price index, the top measure for consumer inflation in the U.S., increased in December to 2.9% in the 12-month period ending last month, according to the Bureau of Labor Statistics, which released the updated consumer price index earlier this month.
December marked the third consecutive month the consumer price index rose, after dipping to an annualized rate of 2.4% in September.
Experts have said that the federal interest rate has the largest effect on car loans and similar large purchases.
Mortgage rates, although not directly tied to the federal interest rate, also reached a 23-year high in 2023 and any future drop in interest rates would likely trickle down to Americans looking to buy a home.
