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Fed Holds Rates Steady, Signals Strong Activity and Lingering Inflation

The U.S. Federal Reserve has decided to keep interest rates unchanged at the 4.25%–4.50% range, maintaining its cautious stance in the face of a complex economic landscape. In its latest FOMC statement, the Fed acknowledged that economic activity remains “solid” and that inflation is still “somewhat elevated.” While previous meetings hinted at possible cuts later in 2025, this time the Fed avoided signaling any clear direction for future rate moves.

What stands out is the Fed’s recognition of increased risks on both sides of the equation: persistently high inflation and the possibility of a weakening labor market. Officials noted that the risks of greater unemployment have grown, a shift from earlier statements that focused mostly on inflation control.

This dual-risk approach suggests the central bank is walking a tightrope — trying to tame inflation without tipping the economy into recession. Markets reacted cautiously, with bond yields and equities reflecting uncertainty about the timing of any rate cuts.

For investors and analysts alike, the key takeaway is flexibility: the Fed is prepared to adapt its policies depending on how inflation and employment evolve in the coming months. The data — not deadlines — will guide its next move.