NEAM Insights

January Overview As the labor market stabilizes even while inflation remains above target, the Fed’s decision to keep the benchmark rate at 3.5%-3.75% reflects the Committee’s preference to wait for additional economic data before taking further action. Noting that the unemployment rate is steadying and payroll additions remain low, while upgrading the language related to the pace of growth to “solid” from “moderating,” the Fed still highlighted that inflation remains above their target. When viewed in the aggregate, the data led the Committee to decide to hold rates at their current levels until a clearer picture of the path of employment and inflation emerges. Read More

December Overview At its most recent meeting in December, the Fed reduced its benchmark rate by 25 basis points, bringing the range to 3.50-3.75%. With the cut, the Fed has now acted at its last three meetings. With the committee having moved the rate 175 basis points since September 2024, the decision to lower the rate did not appear to be a straightforward one. A total of nine committee members voted in favor of the cut. Read More

November Overview With the Fed facing a combination of a slowing labor market, above target inflation and reduced available data from the government shutdown, it was no surprise to see that the October meeting’s minutes highlighted a growing disparity of views with respect to near-term policy. The minutes shared that “participants expressed strongly differing views about what policy decision would most likely be appropriate at the Committee’s December meeting.” Read More

October Overview The Fed once again reduced its benchmark rate at its October meeting, setting the range at 3.75-4.00%. In doing so, the Fed reduced the level to its lowest point since November 2022, bringing the cumulative rate down by 150 basis points since its most recent peak. The decision to do so was not unanimous, with one vote to cut further, and one to hold steady accompanying the majority who voted in favor of the 25-basis point cut. Read More

September Overview At its September meeting, the Fed lowered its benchmark rate range by 25 basis points to 4.00-4.25%. It marked the first move since December 2024. With the employment outlook weakening, Powell stated “the balance of risks has shifted.” Although inflation remains a concern and leaves their dual mandate “in tension,” the Fed, which has no “risk-free path,” believes that “downside risks to employment have risen,” lending support to the committee’s ultimate decision to reduce their benchmark rate range. The move was accompanied by the release of the most recent Summary of Economic Projections, which showed real GDP growing slightly from previous estimates, while unemployment projections remained level to slightly lower and core inflation estimates also tracked a slower course on the way to the Fed’s ultimate target of 2.0%. While policy is not on a “pre-set path,” and remains data dependent, median estimates from the SEP highlight further action, with estimates for the Fed’s benchmark rate showing another 50 basis points of easing by year end, followed by an additional 25 basis points in 2026 and again in 2027. Read More

August Overview With downside risks to employment and upside risks to inflation continuing to present themselves, the minutes from the July FOMC meeting showed that more participants saw tariff induced risks to inflation as a more pressing issue than those impacting the labor market at that time, stating, “a majority of participants judged the upside risk to inflation as the greater of these two risks.” Read More

July Overview At the end of the month, the Fed held its benchmark rate range steady at 4.25% - 4.50%. Nine Fed Governors voted in favor of staying put, while two dissented in favor of a quarter point cut. Despite touting a low unemployment rate and “solid labor market conditions,” the Committee altered its view of the economy from “solid” to “moderating,” and reiterated that “uncertainty remains elevated.” Read More

June Overview The Fed stayed the course in June, keeping the benchmark policy rate range at 4.25 - 4.50% while advocating a cautious approach as recent trade policy measures have yet to show their impact on economic activity and inflation. Per its statement, the Fed believes that uncertainty has “diminished but remains elevated,” the labor market is in “solid” shape, while Read More

May Overview With “heightened uncertainty” still dominating consumer and business sentiment, the Fed unanimously voted to maintain its benchmark rate range at 4.25-4.50%. Arguing that the economy is “still in a solid position,” with unemployment at 4.2%, and inflation lower but still above its target, the Fed remains tethered to the position that upholding the status quo is the best position at this time until hard data encourages them to act otherwise. Read More

April Overview Fed minutes highlighted that the US labor market remains stable and that inflation, although lower, remains above the desired level. New policies, particularly regarding trade, are presenting a challenge, however, and the Fed remains tethered to its data dependency position, waiting for hard data to confirm weakening survey responses on the consumer and business fronts. The Fed sees pressure on inflation favoring the upside, and concurrently growth pressuring to the downside. With “uncertainty higher,” the Fed prefers a more cautious approach, allowing them to remain restrictive enough in the face of potential one-time or more persistent inflation, as well as being ready to let the line out should labor market and/or growth pressures intensify. In a speech at the Economic Club of Chicago mid-month, Powell once again mentioned the “significantly higher than anticipated” tariffs and the corresponding impact on uncertainty, with potential implications for higher transient or persistent inflation, and slower growth on the horizon. With survey data for inflation expectations rising, and domestic and global growth estimates being revised downward, the Fed sits at a crossroads, advocating its intent to act once the data warrants so. Read More