Fed Holds Rates Steady as Uncertainty Grows

The Federal Reserve has decided to keep interest rates unchanged, opting for caution as it monitors inflation and the economic impact of President Donald Trump’s early policies.

Since returning to office, Trump has issued executive orders, including a spending freeze, and threatened 25% tariffs on Mexican and Canadian imports, moves that could fuel inflation.

Meanwhile, the U.S. trade deficit surged 18% in December, as businesses rushed to import goods ahead of potential policy shifts.

While some investors expect rate cuts later in 2025, the Fed remains hesitant, wary of reversing course if inflation picks up. Bond markets have responded with rising long-term yields, reflecting doubts over future monetary policy.

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At his press conference, Fed Chair Jerome Powell reaffirmed the bank’s independence, dismissing Trump’s calls for immediate cuts. With inflation still above target and growth strong, the timeline for rate reductions remains uncertain.

Alexander Zdravkov