Originally reducing interest rates several times in 2024 to stimulate economic growth, Federal Reserve officials now believe it would be best to wait and monitor inflation before further changes, according to this Reuters article.
The stock market changed right away with the ruling. While the Dow Jones Industrial Average fell by 0.3%, major indices including the S&P 500 and the Nasdaq Composite each declined by 0.5%, Another rate cut would have been much anticipated by investors since it would have lowered borrowing costs and stimulated economic growth. To prevent more price rises, the central bank decided to keep rates the same even if inflation still exceeds the aim of the Fed.
Officials of the Federal Reserve underlined that before deciding on future rate changes, they are attentively observing economic data. While inflation has declined from its peak level in 2022, recent data still indicates growing costs of essential goods and services. The Fed appears to be acting cautiously for now, but some analysts believe we will see rate cuts later in 2025.
For consumers and companies, this implies loan, mortgage, credit card interest rates will stay somewhat high. Although debtors may find this difficult, it also helps prevent an overheating of the economy. Future economic reports will be watched closely as the Fed keeps juggling inflation control with economic growth to decide what next actions legislators should take.
