The Federal Reserve will change important interest rates at its fifth meeting

Federal Reserve System On Wednesday, policymakers announced they would be revising benchmark interest rates as they decided to keep stable interest rates amid rising economic uncertainty as they continue to monitor inflationary pressures and labor market data.

The central bank’s decision has led to the benchmark federal funding rates range from 4.25% to 4.5%, following all five Fed policy meetings this year. The central bank cut fees at its final three meetings in 2024. This includes a 50 Vegis Point reduction in September and a 25 base point reduction in November and December.

The Federal Open Market Committee (FOMC), which leads central bank monetary policy movements, announced that “recent indicators suggest that economic activity growth has eased in the first half of the year. Unemployment rates remain low and labor market conditions remain strong.”

The FOMC voted 9-2 to change the rate, opposing federal governors Michelle Bowman and Christopher Waller on the grounds that they reduced the federal fund ratio by 25 base points. There was no one governor and he did not vote for this meeting.

Federal Reserve Chairperson Jerome Powell Speaking at a press conference following the decision, he said the central bank is focusing on double mission targets of maximum employment and stable prices, saying “despite rising uncertainty, the economy is in a solid position.”

He said that economic growth in the first half of 2025, which accounted for a contraction of 0.5% in the first quarter, closed to 1.2% despite today’s report that GDP grew at 3% per annum in the second quarter.

Powell said the data suggests the labour market is “widely balanced and in line with the largest employment,” adding that inflation has eased from its 2022 highs but remains rising compared to the Fed’s 2% long-term target.

“The changes in government policies continue to evolve, and their impact on the economy remains uncertain. Higher tariffs are beginning to be more clearly shown for the prices of some commodities, but the overall impact on economic activity and inflation has yet to be seen,” Powell explained.

“A reasonable basic case is that the impact on inflation may be short-lived, reflecting one-off changes in price levels. However, there is also the possibility that the inflation effect will be more permanent, which is the risk that it will be evaluated and managed,” he added. “Our duty is to interpret long-term inflation expectations well and prevent one-time price levels from becoming an ongoing inflation problem.”

Powell was asked whether the central bank was a pre-metered rate cut in September as policymakers have two more rounds of inflation and labour market data before the next meeting. He responded by stating that the FOMC is considering the data, but emphasized that no decisions have been made regarding future interest rate movements and that the Fed will not do so in advance.

When asked whether the Trump administration’s recently announced trade deal added certainty, Powell admitted it was a “very dynamic time in trade negotiations,” but we admitted that “a lot of uncertainty remains to be resolved” and that we are “apart from seeing where things settle.”

Opponents by the two Fed governors, Bowman and Waller, were the topic of a question raised to Powell, who said, “What you want and what you’re thinking and what you’re doing from opponents, and what it’s clear what you’re doing and what it was having today.”

Powell submitted questions in September about whether policymakers would provide enough time to determine the impact of tariffs on inflation data, and whether the costs of those import taxes have been passed on to consumers.

“The evidence seems to have been paid very little through exporters who lower prices, and through businesses or retailers, people, institutions who pay most of this for now – paid to a small extent… As you know in the June report, it is beginning to appear at consumer prices.

“We know from the research that businesses feel they have an intention to communicate this to consumers. But the truth is, in many cases they may not be able to do so, so we just need to learn empirically and learn this over how long,” he explained.

Fox Business Network’s Edward Lawrence asked about the impact of the Fed’s monetary policy on the housing market.

“Housing is a special case,” Powell replied. “We don’t set mortgage rates on the Fed. We set an overnight rate and the rates that go into the mortgage are long-term rates like the Treasury Department. A 30-year fee may be shorter, but that’s not the overnight Fed rate.

“There are other things happening in the housing sector. One of them is like the long-term housing shortage that we have. We’re not building enough housing. This is not something the Fed can help, and even after things have normalised.

This is a developing story. Please check for updates.