FED Pivot Is DEAD: NO Interest Rate Cuts in 2025 as Economy Adds 256,000, Exceeding Expectations
FED Pivot Is DEAD: NO Interest Rate Cuts in 2025 as Economy Adds 256,000, Exceeding Expectations
Lena Petrova: 1-11-2025
The much-anticipated “pivot” by the Federal Reserve – the shift from aggressive interest rate hikes to potential cuts – appears to be firmly off the table, at least for 2025.
This conclusion comes hot on the heels of a robust jobs report that far exceeded expectations, adding 256,000 jobs to the U.S. economy. The data paints a picture of a labor market that remains surprisingly resilient, potentially dashing hopes for a change in monetary policy aimed at easing the pain of high borrowing costs.
For months, investors and economists have been parsing every piece of economic data, searching for signs that the Fed would soon begin to lower interest rates. The logic was straightforward: inflation had begun to cool, and the cumulative effect of prior rate hikes would eventually lead to a slowdown in economic activity, prompting the central bank to ease its grip. However, the latest employment figures throw a significant wrench into these expectations.
The unexpectedly strong job growth isn’t just a number; it’s a signal that the economy is still running hot. With more people employed, the potential for increased consumer spending and continued inflationary pressures remains very real. This puts the Federal Reserve in a precarious position.
Their primary mandate is to ensure price stability and promote maximum employment. While employment is clearly strong, inflation, while lower than its peak, is still above the Fed’s target of 2%.
The Federal Reserve’s next move will largely depend on upcoming inflation data. If inflation remains stubbornly high despite the strong jobs market, the Fed will likely maintain its current stance. However, a noticeable cooling in inflation could still open the door for rate cuts, albeit later than previously anticipated.
The focus now shifts to subsequent economic reports.
As the Fed continues to monitor the economic landscape, investors and analysts will be closely scrutinizing inflation data, consumer spending figures, and any further shifts in the labor market. The narrative of a quick pivot, it appears, has been replaced by a more cautious and data-dependent approach.
While the strong employment numbers are a positive sign for the labor force, they present a new challenge for the Federal Reserve in their fight to curb inflation. The economic path forward remains uncertain, but one thing is now clear: the prospect of interest rate cuts in 2025 is far from guaranteed.