Durrant Pate/ Contributor

The Federal Reserve has decided to keep interest rates unchanged with the rate target range remaining at 4.25% to 4.5%.

The Fed advises that its median projection for the federal funds rate is 3.9% for 2025. The Fed’s decision to hold interest rates steady is as a result of “recent data indicates that economic activity is growing steadily. The unemployment rate has remained low, and the labour market is strong. However, inflation is still somewhat high.”

The Fed aims to achieve maximum employment and a 2% inflation rate over the long term. There is increased uncertainty about the economic outlook, and is mindful of the risks to its dual mandate. 

As such, the Fed will carefully evaluate incoming data, the evolving economic outlook, and the balance of risks when considering future adjustments to the target range. 

Reducing holdings of securities 

It will also continue to reduce its holdings of Treasury securities, agency debt, and mortgage-backed securities. At its meeting earlier this week, the Fed decided that starting next month it will slow the pace of reducing its securities holdings by lowering the monthly redemption cap on Treasury securities from US$25 billion to US$5 billion while maintaining the cap on agency debt and mortgage-backed securities at US$35 billion.

The Fed is committed to supporting maximum employment and bringing inflation back to its 2% target. It will monitor incoming information and adjust its monetary policy stance as needed to address any risks that could hinder its goals. 

The Fed’s assessments will consider a wide range of information, including labour market conditions, inflation pressures and expectations, and financial and international developments.

Key economic projections:

1.   GDP Growth: Real GDP growth is projected to be 1.7% for 2025, down from the previous estimate of 2.1%.

2.   Unemployment Rate: The unemployment rate is expected to remain stable at around 4.3% through 2025.

3.   Inflation: Inflation is projected to be 2.7% for 2025, slightly higher than the previous forecast.