Fed Update: Hitting the pause button 

(Editors’ note: This January 30, 2025 piece is updated to correct the date reflected in the text box about the FFR in the attached report)

The US Federal Reserve (Fed) hit the pause button on monetary easing, with Chairman Jerome Powell saying they will wait to see the implementation of President Donald Trump’s second-term policies before adjusting interest rates.

Now, eyes are on how Trump’s wave of executive orders plays out.

Key points

• As widely expected, the Fed kept the Federal Funds Target Rate (FFR) at 4.25% to 4.50%, marking a pause in the latest easing cycle following a total 100-basis-point (bp) worth of cuts made in the preceding three meetings.
•  Powell continued to acknowledge that inflation moves closer to the 2% long-term goal and emphasized the importance of the pace and magnitude of rate cuts in both inflation and the labor market
• Powell reiterated that Fed officials are still waiting for how Trump’s specific policies play out, particularly those related to  tariffs, immigration, fiscal measures, and regulatory changes to properly assess their implications to the economy.

What now?

• Metrobank Research forecasts that the Fed will continue its easing cycle in 2025 with a total of 75 bps in cuts, though at a moderate pace.
• Despite the Fed’s pause, we anticipate a 25-bp  policy-rate cut at the Bangko Sentral ng Pilipinas’ meeting in February, narrowing the interest rate differential between the BSP and the Fed to 100 bps.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.) 

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Fed’s breather: Taking a pause after consecutive cuts

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