Federal Reserve officials suggest interest rates won’t be going down anytime soon. They’re focused on keeping inflation in check, which is still running higher than their 2% goal. While some progress has been made, officials say it’s too early to start celebrating—and the new administration’s policies could bring even more uncertainty. This cautious approach will likely have ripple effects on markets, from bonds and the U.S. dollar to gold and stocks.
Several key Fed officials, including Boston Fed President Susan Collins and Fed Governor Michelle Bowman, say it’s time to slow down on rate cuts. They argue that inflation risks remain, even though there’s been some improvement. Bowman, who supported a rate cut in December, said it might be the last one for a while. She believes the current level of interest rates—neither boosting nor slowing the economy—is right where it needs to be.
Philadelphia Fed President Patrick Harker added that any future rate cuts would depend on economic data, and he doesn’t see the Fed rushing into more changes. Kansas City Fed President Jeff Schmid agrees, saying rates may already be close to neutral, the level where they don’t impact economic growth.
The Fed’s preferred measure of inflation rose 2.4% over the past year, with a “core” version (excluding food and energy) even higher at 2.8%. These numbers are still above the Fed’s 2% target. Fed officials are also keeping an eye on the incoming administration’s plans for tariffs and immigration, which could raise inflation or slow down the economy.
Minutes from the Fed’s December meeting show that policymakers are concerned inflation progress has stalled recently. This has led many officials to support holding rates steady for now, instead of risking another cut that could reignite price pressures.
Traders aren’t expecting much action from the Fed anytime soon. Futures markets suggest the first rate cut might not happen until May, and even that depends on inflation data coming in lower. For now, the Fed’s cautious tone is keeping a lid on expectations for rate cuts in the near future.
Gold prices might struggle if interest rates stay high, while the strong U.S. dollar could gain more support. Treasury yields are likely to hold steady, and rate-sensitive stocks, like tech companies, may face some headwinds if borrowing costs remain elevated.
Investors should keep an eye on inflation reports and how the Fed responds to new economic policies from the White House. These factors will play a big role in determining the Fed’s next move and how markets react. For now, patience seems to be the name of the game.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.