Fed Adopts Wait-and-See Stance on Rates Amid Economic Policy Uncertainty
Key Economic Indicators and Fed Policy
* GDP report indicates solid growth in 2024, despite a slightly softer headline number.
* Consumer spending remains robust, with growth of 4.2%.
* Trade and inventory accumulation impacted GDP growth.
* Equipment investment declined, concentrated in aerospace.
* Inflation remains a concern above Fed's 2% target.
Fed's Approach
* Fed Chair Jay Powell outlines a cautious approach, pausing rate increases after three consecutive cuts.
* Policymakers prioritize evaluation of uncertainties in the new Trump administration's economic policies.
* Powell emphasizes the Fed's preference for stability in the current economic environment.
Next Steps
* Personal Consumption Expenditures (PCE) index expected to show persistent inflation.
* Fed officials express concerns over inflation and move cautiously on rate cuts.
* Some economists believe a March cut is still possible, while others predict no cuts in 2025.
* Potential Trump administration tariffs could further impact inflation and Fed policy.