#FedHODL Recent Developments in the Federal Reserve’s Monetary Policy

The U.S. Federal Reserve (Fed) has recently decided to keep interest rates steady at 4.25%–4.5%, marking a significant policy stance since September 2024. This decision comes as inflation, which peaked at nearly 10% in 2022, has gradually declined toward the Fed’s 2% target.

Fed’s Rationale for Holding Rates

Federal Reserve Chairman Jerome Powell emphasized that there is no immediate need to alter monetary policy, citing a strong labor market and resilient economic growth. While some analysts expected a rate cut, the Fed’s decision suggests a cautious approach, ensuring that inflation remains under control before considering any policy shifts.

Political Reactions and Market Impact

Former President Donald Trump has criticized the Fed’s decision, arguing that current policies are restrictive and could hamper economic growth. He has also expressed dissatisfaction with Chairman Powell’s leadership, fueling speculation about potential changes in Fed governance if Trump returns to office.

Meanwhile, financial markets remain divided over future rate movements. Some investors anticipate a rate cut later in 2025, while others believe the Fed will maintain its current stance longer than expected. The bond market has responded with slight volatility, reflecting uncertainty about future monetary policy directions.

Fed’s Exit from NGFS

In another notable move, the Fed has withdrawn from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) as of January 17, 2025. This decision marks a shift in the Fed’s approach toward climate-related financial policies, raising questions about the central bank’s role in sustainable finance.