After making three rate cuts in 2024, the Federal Reserve’s Federal Open Market Committee (FOMC) said earlier today it has decided to maintain the target range for the federal funds rate at 4.25%-to-4.5%.

“Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid,” the Federal Reserve said. “Inflation remains somewhat elevated. “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty around the economic outlook has increased. The Committee is attentive to the risks to both sides of its dual mandate.”

This followed a December announcement, in which the Federal Reserve said that it decided to pause the target range for the federal funds at its current level to 4.25%-to-4.5%, which marked the first time there had been a rate cut in four years, with the last one coming in 2020, during the pandemic, as well as a 0.25% cut, to 4.5%-to-4.75% made in November and a 0.25% cut, to 4.25%-to-4.5%, in December.

February’s U.S. inflation reading, which was recently issued by the U.S. Bureau of Labor Statistics, came in at 2.8%, down from 3.0% in January, which narrowly beat a 2.9% forecast. This figure is significant, especially when compared to June 2022, when inflation peaked at 9.1%. This rise was influenced by pandemic-related factors, including supply chain issues, labor availability, and a shift in consumer spending from goods to services as the economy reopened.

According to the United States Department of Commerce’s Bureau of Economic Analysis (BEA) Personal Consumption Expenditures (PCE) Index, which reflects changes in the prices of goods and services purchased by consumers in the United States, came in at 2.5% in January, down from December’s 2.6% reading. October and November came in at 2.3% and 2.5%, respectively.

As previously reported, a recently-conducted Logistics Management reader survey of more than 100 freight transportation, logistics, and supply chain stakeholders found that 63% of respondents felt a rate cut would help, with 37% saying it would not.

Reasons cited for the former included: access to cheaper capital helping the sector and various businesses; reducing interest payments and improving cash flow; spurring housing sector growth; and improving consumer demand, among others. And reasons for the latter included: labor issues not subject to interest rates and deflation, among others.

Paul Bingham, S&P Global Market Intelligence Economist, said that his firm’s most recent forecast for 2025, which included tariff assumptions and other factors, said on a recent LM podcast, prior to today’s announcement that he expects the U.S. Consumer Price Index to come in at 3.2%, well above the Federal Reserve’s 2.0% target.

“We have now made a policy assumption for this year, for what the Federal Reserve’s actions will be, in that it will not reduce interest rates further,” he said. “It took steps last year when inflation was coming down prior to putting a pause on that. We think it will remain in ‘pause mode’ at least until December because inflation is still running higher than its target by not a small amount, and not continuing the decline that we’d seen in 2024.”