Fed's reticence confuses investors

Prevailing Caution

- SAQIB IQBAL AHMED & DAVIDE BARBUSCIA

The Federal Reserve's decision to avoid signaling imminent rate cuts despite relentless political pressure underscores its prevailing caution and has forced investors to dial back expectations for an easing at the next policy meeting. The Federal Open Market Committee held interest rates on Wednesday in a split decision that gave little indication of when borrowing costs might be lowered. It also drew dissent from two Fed governors, both appointees of President Donald Trump who agree with him that monetary policy is too tight.

The overnight policy rate controlled by the Fed remains in a 4.25%-4.50% range. The last rate cut was in December and the Fed hiked rates from March 2022 to July 2023 to fight inflation.