The US Federal Reserve has signalled that it is in no hurry to cut interest rates, reflecting confidence in the strength of the American economy despite growing political pressure to ease borrowing costs.
At its latest policy meeting, the Federal Reserve kept interest rates unchanged at 3.5%–3.75%, following three consecutive rate cuts earlier. The decision was widely expected by financial markets and reinforces the central bank’s cautious stance on monetary easing.
Fed Chair Jerome Powell highlighted that economic growth in the United States continues to exceed expectations, while labour market conditions appear to be stabilising. According to recent data, US GDP growth reached 4.4% in the third quarter of 2025, with some estimates suggesting growth may have accelerated further in the final quarter of the year.
Powell noted that current borrowing costs do not appear to be significantly restrictive and that inflation trends are broadly tracking as expected. The Federal Reserve’s preferred inflation gauge remains above the 2% target, suggesting there is still work to be done before declaring victory on price stability.
While the broader policy committee supported holding rates steady, there were two dissenting votes in favour of an immediate rate cut. However, the majority view was that cutting rates too early could risk reigniting inflation pressures.
Financial markets reacted calmly to the announcement. US equities finished essentially flat, bond yields rose modestly, and the US dollar strengthened slightly. Futures markets indicate that investors now expect the next rate cut no earlier than mid-2026, unless economic conditions deteriorate sharply.
For Australian investors, the Fed’s stance has important implications. A prolonged period of higher US interest rates can support the US dollar, influence global capital flows, and impact commodity prices. It also reinforces the message that global central banks, including the Reserve Bank of Australia, may remain cautious about their own rate cuts.
The Fed also emphasised the importance of its independence from political influence, underlining that policy decisions are driven strictly by economic data and long-term stability considerations.
Bottom line:
As per global media reports, the US Federal Reserve is prioritising economic stability over rapid stimulus. With growth holding firm and inflation still elevated, interest rates are likely to remain higher for longer — a key theme global and Australian investors should continue to monitor closely.
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