United States: Central Bank keeps rates steady in January
Latest bank decision: At its meeting ending on 28 January, the Central Bank kept the target range for the federal funds rate at 3.50–3.75%, following 75 basis points of rate cuts from August to December.
Strong economy underpins hold: The Fed felt in little rush to cut rates further given that the economy is expanding robustly and the unemployment rate has stabilized somewhat. On the flipside, there was no need to hike rates given that inflation appears to have topped out at 3% and has declined in the past few months.
More cuts to come: Our Consensus is for two further 25 basis-point cuts to the federal funds rate by end-2026, with forecasts ranging from 125 basis points of reductions to the Bank on hold. Much will depend on whether the Trump administration is able to exercise greater control over the Fed going forward, including by nominating a new governor after Jerome Powell’s term ends in May 2026.
Panelist insight: On the outlook, Desjardins’ Francis Généreux said:
“The Fed judges that its current monetary policy stance is “in a good place”. We share this view. We do not anticipate any rate movements before the second half of 2026. At that point, the Fed could bring the federal funds rate somewhat closer to the middle of the estimated neutral range.”
Nomura analysts concurred:
“We continue to expect no additional cuts under the Powell-led Fed, with 25bp cuts in June and September under Powell’s successor.”