FOMC Holds Rates Steady; MBA Economist Weighs In

The Federal Reserve’s Federal Open Market Committee left interest rates unchanged Jan. 29.

“Meeting the market’s expectation, no aspect of monetary policy changed during the first FOMC meeting of 2025,” said MBA SVP and Chief Economist Mike Fratantoni. “The FOMC sees solid growth, a strong job market and inflation still above the Fed’s target, indicating that its current target for the federal funds rate is about right, holding back the economy a bit to move inflation down over time. Quantitative tightening continues without changes, with their holdings of Treasuries and MBS continuing to slowly roll off passively.”

“With no news in the statement, every word from upcoming speeches will be closely parsed to determine whether this is just a pause before another cut or two or whether this level of the federal funds rate will be the low point for this cycle. MBA is forecasting one additional cut this year.  With the Fed on hold, we do expect that longer-term rates, including mortgage rates, will also stay within a narrow range for the foreseeable future,” Fratantoni continued.

The full FOMC statement reads:

Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2%. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2% objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Adriana D. Kugler; Alberto G. Musalem; Jeffrey R. Schmid; and Christopher J. Waller.