Fed Watch: A Pause That Refreshes?

2025-01-29 23:25:00 ET

Summary

• The Federal Reserve kept rates unchanged at the January Federal Open Market Committee (FOMC) meeting, maintaining a 4.25%–4.50% range as it reassesses the economic landscape and recalibrates policy to a potentially higher “neutral” rate estimate.
• With the Fed signaling a more cautious stance, Treasury yields are expected to remain elevated, particularly for intermediate and long-term maturities, which could face upward pressure.
• The Fed’s expected shift to a more measured easing path, coupled with ongoing adjustments to its quantitative tightening policy, reinforces the need for careful fixed income positioning.

By Kevin Flanagan, Head of Fixed Income Strategy

For the first time since the Fed began cutting rates at their September FOMC meeting, the voting members decided to keep rates unchanged to begin 2025. As a result, the Fed Funds trading range remains at 4.25%-4.50%....

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