Fed Indicates Potential Rate Hikes if Inflation Remains Above Target Levels
The Lonski Group President John Lonski weighs in on the Federal Reserve’s next rate decision, President Donald Trump’s anticipated speech on the economy, and the president’s call for a credit card interest rate cap on ‘Varney & Co.’
Federal Reserve policymakers have largely agreed to maintain the current interest rates, despite two members advocating for cuts. However, several officials indicated that rate hikes could be necessary if inflation continues to remain high.
The minutes from the January meeting of the Federal Open Market Committee (FOMC), the Fed’s monetary policy-setting body, were released on Wednesday. They revealed that some policymakers favored including language that would signal potential future rate hikes to combat stubborn inflation.
The FOMC voted 10-2 to keep the benchmark federal funds rate within the range of 3.5% to 3.75%. Fed Governors Christopher Waller and Stephen Miran dissented, citing concerns regarding the labor market. Inflation has consistently exceeded the Fed’s target of 2%, causing hesitation among some members about further rate cuts.
“Several participants indicated that they would have supported a two-sided description of the Committee’s future interest rate decisions, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels,” the FOMC minutes noted.
POWELL SAYS AMERICANS FORCED TO ‘ECONOMIZE’ AS STUBBORN INFLATION SQUEEZES HOUSEHOLD BUDGETS
Federal Reserve Chair Jerome Powell said inflation would be closer to 2% but for the effects of tariffs. (Jim Watson/AFP/Getty Images)
The minutes also highlighted that several policymakers commented on the appropriateness of further downward adjustments to the target range for the federal funds rate if inflation were to decline as expected.
“Some participants commented that it would likely be appropriate to hold the policy rate steady for some time as the Committee carefully assesses incoming data. A number of these participants judged that additional policy easing may not be warranted until there is clear evidence that disinflation is firmly back on track,” the minutes stated.
FED HOLDS INTEREST RATES STEADY, PAUSING RATE CUTS AMID ECONOMIC UNCERTAINTY
Fed Governor Stephen Miran was one of two policymakers to dissent from the Fed’s decision to leave rates steady. (Michael Nagle/Bloomberg/Getty Images)
The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) index, remained significantly above the central bank’s 2% long-term inflation target at the end of last year. In April 2025, PCE inflation reached its lowest year-over-year level of 2.2%, the lowest since September 2024. Core PCE, which excludes volatile food and energy prices, was recorded at 2.6% in April 2025, marking the lowest level since June 2024.
FED’S MIRAN MAINTAINS CALL FOR AGGRESSIVE INTEREST RATE CUTS THIS YEAR
The Trump administration’s tariff announcements on “Liberation Day” in early April and the subsequent implementation of those import taxes contributed to a rise in inflation last year, driving PCE higher.
The most recent PCE inflation reading for November showed a rate of 2.8%, matching its September figure, which was the highest since October 2023. Core PCE also stood at 2.8% in November.
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Fed Chair Jerome Powell stated at his January press conference following the FOMC decision that core PCE inflation would be “just a bit above 2%” if not for the impact of tariffs on goods prices.
The Lonski Group President John Lonski weighs in on the Federal Reserve’s next rate decision, President Donald Trump’s anticipated speech on the economy, and the president’s call for a credit card interest rate cap on ‘Varney & Co.’
Federal Reserve policymakers have largely agreed to maintain the current interest rates, despite two members advocating for cuts. However, several officials indicated that rate hikes could be necessary if inflation continues to remain high.
The minutes from the January meeting of the Federal Open Market Committee (FOMC), the Fed’s monetary policy-setting body, were released on Wednesday. They revealed that some policymakers favored including language that would signal potential future rate hikes to combat stubborn inflation.
The FOMC voted 10-2 to keep the benchmark federal funds rate within the range of 3.5% to 3.75%. Fed Governors Christopher Waller and Stephen Miran dissented, citing concerns regarding the labor market. Inflation has consistently exceeded the Fed’s target of 2%, causing hesitation among some members about further rate cuts.
“Several participants indicated that they would have supported a two-sided description of the Committee’s future interest rate decisions, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels,” the FOMC minutes noted.
POWELL SAYS AMERICANS FORCED TO ‘ECONOMIZE’ AS STUBBORN INFLATION SQUEEZES HOUSEHOLD BUDGETS
Federal Reserve Chair Jerome Powell said inflation would be closer to 2% but for the effects of tariffs. (Jim Watson/AFP/Getty Images)
The minutes also highlighted that several policymakers commented on the appropriateness of further downward adjustments to the target range for the federal funds rate if inflation were to decline as expected.
“Some participants commented that it would likely be appropriate to hold the policy rate steady for some time as the Committee carefully assesses incoming data. A number of these participants judged that additional policy easing may not be warranted until there is clear evidence that disinflation is firmly back on track,” the minutes stated.
FED HOLDS INTEREST RATES STEADY, PAUSING RATE CUTS AMID ECONOMIC UNCERTAINTY
Fed Governor Stephen Miran was one of two policymakers to dissent from the Fed’s decision to leave rates steady. (Michael Nagle/Bloomberg/Getty Images)
The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) index, remained significantly above the central bank’s 2% long-term inflation target at the end of last year. In April 2025, PCE inflation reached its lowest year-over-year level of 2.2%, the lowest since September 2024. Core PCE, which excludes volatile food and energy prices, was recorded at 2.6% in April 2025, marking the lowest level since June 2024.
FED’S MIRAN MAINTAINS CALL FOR AGGRESSIVE INTEREST RATE CUTS THIS YEAR
The Trump administration’s tariff announcements on “Liberation Day” in early April and the subsequent implementation of those import taxes contributed to a rise in inflation last year, driving PCE higher.
The most recent PCE inflation reading for November showed a rate of 2.8%, matching its September figure, which was the highest since October 2023. Core PCE also stood at 2.8% in November.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Fed Chair Jerome Powell stated at his January press conference following the FOMC decision that core PCE inflation would be “just a bit above 2%” if not for the impact of tariffs on goods prices.
