Lonski Group President John Lonski weighs in on the Federal Reserve’s next interest rate decision, President Donald Trump’s expected speech on the economy and the president’s call for a ceiling on credit card rates for ‘Varney & Co.’
Federal Reserve Policymakers largely agreed on the decision to leave rates unchanged despite two calls for cuts, although several policymakers indicated that rate hikes could be in order if inflation remains high.
The minutes of the January meeting of the Federal Open Market Committee (FOMC), the Fed’s monetary policy-setting panel, were released Wednesday and show that some policymakers are in favor of including language signaling the possibility of future rate hikes to dampen interest rates. persistent inflation in the announcement.
The FOMC voted 10-2 to leave the Fed funds rate at its current level of 3.5% to 3.75%, while Fed Governors Christopher Waller and Stephen Miran disagreed with labor market concerns. Inflation is still high above the Fed’s 2% target, which has led others to question further rate cuts.
“Several participants indicated that they would have supported a two-sided description of the Committee’s future interest rate decisions that reflected the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains above target levels,” the FOMC minutes said.
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Federal Reserve Chairman Jerome Powell said inflation would be closer to 2% if no tariffs were imposed. (Jim Watson/AFP/Getty Images)
The minutes also noted that several policymakers “noted that further downward adjustments to the target range for the federal funds rate would probably be appropriate if inflation were to decline in line with their expectations.”
“Some participants noted that it would likely be appropriate to hold the policy rate steady for some time as the Committee carefully assesses incoming data, and a number of these participants assessed that additional policy easing may not be warranted until there is clear evidence that disinflation progress is firmly back on track,” the minutes said.
The Fed is keeping rates steady, pausing interest rate cuts amid economic uncertainty
Fed Governor Stephen Miran was one of two policymakers who disagreed with the Fed’s decision to leave rates unchanged. (Michael Nagle/Bloomberg/Getty Images)
The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) index, was well above the central bank’s long-term inflation target of 2% at the end of last year.
PCE inflation was at its lowest year-on-year level in 2025, but fell to 2.2% in April, the lowest level since September 2024. The core PCE, which excludes volatile food and energy prices, was 2.6% in April 2025, the lowest level since June 2024.
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The Trump administration tariff announcements on “Liberation Day” in early April and the introduction of these import taxes contributed to a rise in inflation last year, pushing the PCE higher.
The latest PCE inflation was for the month of November, when it reached 2.8%, equaling September’s value, the highest level since October 2023. Core PCE also stood at 2.8% in November.
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Fed Chairman Jerome Powell said at his January press conference after the FOMC decision that core PCE inflation would be “just above 2%” if not for the effects of tariffs on commodity prices.
