No cut, and no comment No cut, and no comment http://www.federatedhermes.com/us/static/images/fhi/fed-hermes-logo-amp.png http://www.federatedhermes.com/us/daf\images\insights\article\federal-reserve-building-eagle-small.jpg January 29 2025 January 30 2025

No cut, and no comment

The Fed kept rates steady, and Chair Powell kept his distance from Trump.  

Published January 30 2025
My Content

Yesterday’s Federal Reserve policy meeting was the nonevent we had suspected—and hoped—it would be. The FOMC kept the fed funds target range at 4.25-4.50%, and Chair Jerome Powell avoided questions about politics. Predictably, the first question from the press was about President Trump’s comments at the World Economic Forum last week, when he stirred the waters by threatening to demand a rate cut. Powell said he would not address that, but after repeated inquiries, he did reveal that neither Trump nor anyone in his administration had contacted him. Powell also parried numerous questions about the potential implications of the many rumored tariff and trade policies, saying there are far too many uncertainties to consider and a very, very wide range of outcomes. But here, too, he may have revealed more than he wanted by saying it’s not the Fed’s job to “criticize” fiscal plans, before later adding “or praise” them.

Here and there, a few questions actually relating directly to monetary policy reached his ears. He noted the stabilization of the labor market and said that the risks to the outlook are roughly balanced between unemployment and inflation, adding that the stance of monetary policy remains restrictive relative to historical norms. Powell also announced that his staff has begun their customary five-year policy framework review, hastening to say that the Committee is not straying from its 2% inflation goal. We think the Fed will eventually need to reevaluate its inflation policy, but doing so amid the present uncertainty would probably unhinge the market, which is likely why he tried to preempt questions.

In all, the meeting reinforced our belief the Fed is content to sit on the sidelines, in no hurry to move until the future is clearer. The same approach appears to apply to the runoff of its balance sheet. The FOMC continued the current pace of shrinkage, with Powell saying the supply of bank reserves remains abundant. We still think they will cut rates this year and have penciled in a 25 basis-point cut by mid-2025 and another coming around autumn.

Tags Monetary Policy . Interest Rates . Liquidity . Fixed Income . Equity .
DISCLOSURES

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Past performance is not a reliable indicator of future results. 

This is a marketing communication. The views and opinions contained herein are as of the date indicated above, are those of author(s) noted above, and may not necessarily represent views expressed or reflected in other communications, strategies or products. These views are as of the date indicated above and are subject to change based on market conditions and other factors. The information herein is believed to be reliable, but Federated Hermes and its subsidiaries do not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. This document has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. 

This document is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities, related financial instruments or advisory services. Figures, unless otherwise indicated, are sourced from Federated Hermes. Federated Hermes has attempted to ensure the accuracy of the data it is reporting, however, it makes no representations or warranties, expressed or implied, as to the accuracy or completeness of the information reported. The data contained in this document is for informational purposes only, and should not be relied upon to make investment decisions. 

Federated Hermes shall not be liable for any loss or damage resulting from the use of any information contained on this document. This document is not investment research and is available to any investment firm wishing to receive it. The distribution of the information contained in this document in certain jurisdictions may be restricted and, accordingly, persons into whose possession this document comes are required to make themselves aware of and to observe such restrictions. 

United Kingdom: For Professional investors only. Distributed in the UK by Hermes Investment Management Limited (“HIML”) which is authorised and regulated by the Financial Conduct Authority. Registered address: Sixth Floor, 150 Cheapside, London EC2V 6ET. HIML is also a registered investment adviser with the United States Securities and Exchange Commission (“SEC”).

European Union: For Professional investors only. Distributed in the EU by Hermes Fund Managers Ireland Limited which is authorised and regulated by the Central Bank of Ireland. Registered address: 7/8 Upper Mount Street, Dublin 2, Ireland, DO2 FT59. 

Australia: This document is for Wholesale Investors only. Distributed by Federated Investors Australia Services Ltd. ACN 161 230 637 (FIAS). HIML does not hold an Australian financial services licence (AFS licence) under the Corporations Act 2001 (Cth) ("Corporations Act"). HIML operates under the relevant class order relief from the Australian Securities and Investments Commission (ASIC) while FIAS holds an AFS licence (Licence Number - 433831).

Japan: This document is for Professional Investors only. Distributed in Japan by Federated Hermes Japan Ltd which is registered as a Financial Instruments Business Operator in Japan (Registration Number: Director General of the Kanto Local Finance Bureau (Kinsho) No. 3327), and conducting the Investment Advisory and Agency Business as defined in Article 28 (3) of the Financial Instruments and Exchange Act (“FIEA”). 

Singapore: This document is for Accredited and Institutional Investors only. Distributed in Singapore by Hermes GPE (Singapore) Pte. Ltd (“HGPE Singapore”). HGPE Singapore is regulated by the Monetary Authority of Singapore. 

United States: This information is being provided by Federated Hermes, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, and Federated Investment Management Company, at address 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, Federated Global Investment Management Corp. at address 101 Park Avenue, Suite 4100, New York, New York 10178-0002, and MDT Advisers at address 125 High Street Oliver Street Tower, 21st Floor Boston, Massachusetts 02110.

Issued and approved by Federated Investment Management Company

4241436900