Title: Delays Likely in Interest Rate Reduction Until March, Potentially Longer
The Federal Open Market Committee (FOMC) is unlikely to decrease interest rates on January 29, 2025. As per the CME FedWatch Tool, there's a 99.5% chance that interest rates stay at 4.25% to 4.5%. Despite this, there's an equal chance of a rate cut in March or May.
The labor market continues to show strength, with unemployment rates low and wages growing faster than inflation. However, inflation rates have been subdued, which could potentially prompt the FOMC to lower interest rates in the future, particularly if inflation stays on track for a 2% annual rate.
Fed Governor Lisa Cook mentioned the labor market's strength on January 6, 2025, stating that it's "solid" with low unemployment rates and growing wages. Fed Governor Michelle Bowman also supported pausing on interest rate cuts for now, expressing her belief that the rate now reflects 100 basis points of cuts since September and is closer to the neutral level.
Conversely, Governor Christopher Waller was more optimistic about further disinflation, anticipating that inflation will continue to decrease toward the 2% goal over the medium term. The upcoming FOMC decision is data-dependent, with the focus on whether inflation trends to a 2% annual rate. Interest rate cuts in 2025 are likely, but not in January.
Enrichment Data:- As of January 2025, there's a 14% likelihood of a 25 basis points reduction to the range of 5.00% to 5.25% in December 2024, according to the FedWatch Tool.- There's a 30% chance of a 25 basis points cut at the July 2025 meeting and a 44% probability for the same reduction in September 2025.
Regarding March or May 2023, it is worth noting that these timeframes are not directly relevant to the current year's discussions. The sources provided mainly focus on 2024 and 2025 projections and factors influencing the Fed's decisions at that time. For accurate information about March or May 2023, one would need to refer to historical data or specific analyses from that period.
The FOMC's next meeting is scheduled for March 2025, and recent statements from Fed officials suggest that while interest rates may decrease, it's unlikely during this meeting due to the strong labor market and subdued inflation rates. The FOMC, which includes members like Governor Cook and Bowman, is closely monitoring inflation data to determine future moves in U.S. monetary policy. According to the January Fed preview, interest rates are unlikely to decrease in January 2025, but the FOMC's decisions are data-dependent, with the focus on whether inflation will stay on track for a 2% annual rate.
