• The Federal Reserve unanimously decided to keep interest rates at the 4.25-4.50% range.
  • The US markets, however, responded negatively with the S&P 500 falling 0.8% and the Nasdaq dropping over 1%
  • The Fed shifted its stance on inflation progress and removed language about "making progress" toward the 2% goal.

The US markets withdrew on Wednesday, January 29, after the Federal Reserve unanimously voted to keep interest rates unchanged in its first policy decision under President Trump's second term.

The decision sent the S&P 500 down 0.8%, while the tech-heavy Nasdaq Composite fell more than 1%, and the Dow Jones Industrial Average dropped 179 points.

The central bank maintained its benchmark interest rate in the 4.25-4.50% range, marking a pause following three consecutive rate cuts at the end of 2024.

Notably, the Fed removed language from its policy statement about inflation having "made progress" toward its 2% objective, signaling heightened concerns about price stability.

The decision reflects growing caution among policymakers about inflation risks and potential economic policy changes under the new Trump administration.

The Fed's December projections already showed a reduction in expected rate cuts for 2025 from four to just two, highlighting increasing monetary policy conservatism.

While the Fed acknowledged that economic activity continues to expand at a solid pace and labor market conditions remain robust, it underscored that inflation stays "somewhat elevated" and the economic outlook uncertain.

This stance comes amid recent market volatility, partly triggered by developments such as DeepSeek's impact on US technology stocks.

Jerome Powell's Fed has maintained a delicate balance, with officials noting that employment and inflation goals are "roughly in balance."

The unanimous nature of the decision marks a shift from December's meeting, where Cleveland Fed President Beth Hammack had diverged from the majority by supporting a rate pause rather than the implemented quarter-point cut.

Markets are now pricing in a delayed timeline for rate cuts, with investors expecting the central bank to hold off until June before making any adjustments to monetary policy.

Edited By Annette George