Fed Holds Rates Steady at 4.25%, Signals Patience Amid Sticky Inflation

The Federal Reserve held interest rates steady at 4.25% on Wednesday, as widely expected, marking the third consecutive pause in what has been a cautious easing cycle that began in late 2025.

In the post-meeting press conference, Chair Jerome Powell struck a balanced tone, acknowledging that "the economy continues to expand at a solid pace" while noting that inflation progress has "stalled somewhat" in recent months. Core PCE remains at 2.7%, above the Fed's 2% target.

Key takeaways from the FOMC statement:

• The labor market remains "strong" with unemployment at 4.0%
• Economic activity has been "expanding at a solid pace"
• Inflation remains "somewhat elevated"
• The Committee will continue to assess incoming data on a meeting-by-meeting basis

Markets had priced in a 95% probability of a hold, according to CME FedWatch data. The more interesting signal came from the updated dot plot, which showed the median FOMC member now projecting just one additional rate cut in 2026, down from three projected in December.

Treasury yields were little changed on the decision, with the 2-year holding at 4.12% and the 10-year at 4.78%. The S&P 500 edged 0.2% higher as the decision removed near-term uncertainty.

The next FOMC meeting is scheduled for March 18-19, where fresh economic projections will provide more clarity on the rate path ahead.