Dive Brief:

• The Federal Reserve on Wednesday, in a decision with two dissents, held the main interest rate steady at a range between 3.5% and 3.75%, noting steady economic growth and signs of stability in the unemployment rate.
• Policymakers cautioned that inflation persists above their 2% goal while not expressing the same degree of concern about weak hiring that prompted them to trim the benchmark interest rate at three consecutive meetings during the final months of last year.
• “Economic activity has been expanding at a solid pace,” the policy-setting Federal Open Market Committee said in a statement. “Job gains have remained low, and the unemployment rate has shown some signs of stabilization,” the committee said after a two-day meeting, while noting that “uncertainty about the economic outlook remains elevated.” 

Dive Insight:

Policymakers, aiming to balance their mandate to achieve both price stability and full employment, have sought through monetary easing to shore up a shaky job market while not fueling inflation.

Price pressures have changed little in recent months. The Fed’s preferred inflation measure —  the personal consumption expenditures price index minus volatile food and energy prices — rose 2.8% in November and will likely fall to 2.5% by the end of this year, according to a median estimate by Fed officials last month.

Meanwhile, the unemployment rate in December edged lower to 4.4% from 4.5% in November but still exceeds the 4% level in January 2025.

Also, hiring by U.S. employers last month fell below expectations, with payrolls expanding by just 50,000.

Fed Governors Stephen Miran and Christopher Waller dissented against the policy decision, favoring a quarter-point reduction in the benchmark interest rate to a range between 3.25% and 3.5%. Appointed by President Donald Trump, they have voiced concern in recent months about signs of weakness in the job market.

Consumer confidence, deflated by low hiring and high prices, sagged this month to the lowest level in more than a decade, the Conference Board said Tuesday.

An index based on a survey of household confidence fell to 84.5 this month from 94.2 in December, the Conference Board said.

“Confidence collapsed in January as consumer concerns about both the present situation and expectations for the future deepened,” Conference Board Chief Economist Dana Peterson said Tuesday in a statement.

“References to prices and inflation, oil and gas prices, and food and grocery prices remained elevated,” she said. “Mentions of tariffs and trade, politics and the labor market also rose in January, and references to health insurance and war edged higher.”