Investors looking for certainty from this week’s Federal Reserve meeting came up empty, with Wall Street now expecting a more deliberate central bank unlikely to make a move on interest rates until later in the year. The Fed announced Wednesday that it would be holding the line on its key borrowing rate, and in doing so offered no guidance about where things are heading from here. “With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Chair Jerome Powell said at his post-meeting news conference. It was a position Powell stated no fewer than five times during the session. In the aftermath, Wall Street forecasters for the most part took the stance that the rate-setting Federal Open Market Committee likely won’t be moving until at least the summer months. “In sum, there was little in [Wednesday’s] statement to suggest the FOMC is contemplating another rate cut in the near future,” Wells Fargo chief economist Jay Bryson said in a note. “With inflation remaining stubbornly above target, we see little reason for the FOMC to cut rates in the near term.” Market pricing sees the next rate reduction coming in June. Fed fund futures pricing indicates a rate of 3.9% by the central bank’s December meeting, implying about a 62% probability of two cuts before the end of the year, according to CME Group data. That jibes with the two cuts FOMC members penciled in at the December meeting , a less aggressive posture than the committee took during the previous update in September. “In light of [Wednesday’s] message, we remain comfortable with our standing forecast that the FOMC will deliver two more 25bp cuts in June and December this year and one more in 2026,” Goldman Sachs economist David Mericle said in a note. “Over the course of the next few FOMC meetings, we expect year-on-year core PCE inflation to fall meaningfully and in a way that ‘builds [the] confidence’ that Powell said he wanted to see.” Inflation not cooperating Inflation indicators, though, are currently running above the Fed’s 2% target. The Commerce Department reported Thursday that the chain-weighted price index, an inflation measure that accounts for changes in consumer behavior, rose at a 2.2% pace in the fourth quarter, above the 1.9% level in the third quarter, though slightly below the Dow Jones consensus estimate. Stubbornly high inflation along with a solid labor market and concerns over potentially inflationary policy measures from President Donald Trump have some on Wall Street skeptical that the Fed will cut at all this year. “We didn’t learn a lot from the Fed … And that is probably exactly as the Fed intended,” wrote Aditya Bhave, senior U.S. economist at Bank of America. “We remain comfortable with our call that the cutting cycle is over.” Likewise, Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said the current stance “fits with our preexisting view for the Fed, which is that a skip at the January meeting is likely to turn into an extended pause.” “As such, the fed funds rate is likely to remain above 4% this year, with a base case of no additional reductions,” he added. On the other end of the spectrum, Morgan Stanley still thinks a March cut is likely, though current futures market pricing only sees an 18% probability of a move. However, between now and then the Fed will get a raft of data, and perhaps a clearer picture of how Trump’s actions will measure up against his words. “We think near-term rate cuts will be dependent on inflation and, likely, delayed tariff implementation,” Morgan Stanley chief U.S. economist Michael Gapen wrote. “We retain our call for a March rate cut on our favorable inflation forecast, though we view the bar as higher now than before.” —CNBC’s Michael Bloom contributed reporting.
