Fed Wrap – Fed holds as employment and inflation data diverge
Key takeaways
- Ryan Weldon, from IFM’s Debt Investments team in New York, features in our Fed Wrap market update videos discussing central bank themes in debt markets, with a particular focus on the US Federal Reserve (Fed).
- In this edition, Ryan discusses the outcomes of the January Fed meeting, the recent US economic data, and what the Fed will be looking at ahead of the expected leadership change later this year.
At the January meeting, the Federal Reserve held rates, maintaining the upper band of their policy rate at 3.75%. There were two dissents from Governor Waller and Miran in favor of a 25bp cut.
The statement highlighted the recent stabilization in the unemployment rate but also noted the low overall job gains numbers. Additionally, the statement removed language that the downside risks to employment have risen in recent months. On the inflation side, the Fed recognized that it has remained somewhat elevated.
Overall, the statement showed the difficulty the Fed faces in balancing the softening labor market with the stubborn inflation backdrop. Furthermore, it showed the Feds focus may no longer be mostly on employment following three consecutive cuts at the end of 2025 and that persistent inflation may take more of a focus in policy decisions moving forward.
Meet the author
Ryan Weldon
Ryan supports the dealing and portfolio management functions of IFM Investors’ cash and fixed income portfolios in the US. He also assists in the execution of foreign exchange and derivative overlay strategies for internal and external clients.
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