Fed Holds Rates at 4.25%-4.50%, Hints at Possible 2025 Cuts

The Federal Reserve kept its benchmark interest rate unchanged at 4.25% to 4.50% after its December Federal Open Market Committee meeting, signaling that policymakers remain cautious as they balance solid economic growth against easing inflation pressures.

In its latest decision, the central bank pointed to a still-resilient economy and a labor market that has begun to cool, while noting that inflation remains above its 2% target. Fed Chair Jerome Powell said progress on inflation has continued, but emphasized that future rate cuts will depend on incoming economic data and the outlook for price stability.

The decision suggests the Fed is in no rush to begin easing policy, even as markets increasingly expect cuts in 2025. Investors responded positively to the announcement, with the S&P 500 rising 1.1% and the dollar index edging lower as traders priced in the possibility of three rate cuts next year.

The Fed’s latest stance reflects a broader effort to avoid cutting too soon and risking renewed inflation, while also preparing for a slower labor market if economic conditions weaken further. For now, policymakers appear committed to a data-dependent approach heading into 2025.