The Federal Reserve held the federal funds rate steady between 4.25% and 4.50% during their latest meeting, with the announcement largely reiterating past statements. Chair Powell emphasized the need for significant progress on inflation or unexpected labor market trends before considering rate cuts. Overall, there is a sense of uncertainty regarding the fiscal landscape, prompting a cautious approach from the Fed. The familiar 'Fed put' that previously supported risk assets is fading, signaling a shift in policy outlook as data remains solid, leading to a more nuanced economic environment going forward.
The FOMC maintained its current interest rate at 4.25% - 4.50% during the recent meeting, indicating stability in their policy outlook amid economic uncertainties.
Powell noted that progress on inflation or unexpected labor market weakness would be necessary for any future rate cuts, reinforcing the existing approach from 2024.
With growing fiscal policy uncertainties and a more balanced risk outlook, the previous comfort of the Fed put is diminishing, indicating potential shifts in market response.
Policymakers are opting to 'play for time' as they navigate the complexities of current economic conditions, emphasizing cautiousness in decision-making.
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