US Fed Holds Rates Steady, Not Yet Ready for Cuts

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Jan 31, 2024

Image copyright: Anna Moneymaker/Staff/Getty Images New via Getty Imagesstory last updated Jan 31

The Facts

The US Federal Reserve announced on Wednesday that it would hold interest rates steady, signaling that it would abandon its policy of continued rate hikes to bring inflation down to its goal of 2%. However, the Fed also poured cold water on hopes that it would start cutting rates for the first time in years.
The Federal Open Market Committee (FOMC) met for the first time this year and wrapped up its two-day meeting by releasing a statement that removed language about rate hikes.

The Spin

Establishment-critical narrative

Thankfully, the Fed seems to be moving beyond its overly hawkish policy of nonstop rate hikes, but instead of keeping rates constant and stalling the economy until inflation reaches 2%, it should cut interest rates immediately and allow the economy to grow. While some say the Fed is being moderate in its current approach, the fact remains that rates are still at a 22-year high. The Fed’s policy has done little to bring down inflation, and any cool-down is due to natural economic cycles.

Economic Policy Institute

Pro-establishment narrative

The Fed has taken a deliberate approach to its rate-setting policy, and it seems like it has moved past its series of rate hikes. However, the Fed is rightfully wary of decreasing key rates as soon as the economy gets stronger. While some investors may get frustrated by this approach, the Fed’s patience has allowed the economy to continue growing at a stable rate while also slowing down rampant inflation. There are many moving parts that factor into rate decisions, and the Fed is prudently waiting for the economic picture to become clearer.