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Jan 23 - 02:55 PM

ANZ: What We Expect from the January FOMC

By eFXdata  —  Jan 23 - 01:00 PM

Synopsis:

ANZ anticipates no changes to the federal funds rate at the upcoming January 26-27 FOMC meeting. The focus will likely shift to whether the March meeting is considered "live" or signals an extended pause in rate adjustments.

Key Points:

  1. Pause in Rate Cuts:

    • The Fed has already implemented 100bps of rate cuts since September 2024.
    • Strong economic momentum, robust employment growth, and moderating inflation reduce the urgency for further rate cuts.
  2. Economic and Policy Context:

    • The US economy has started 2025 with strength, and annual inflation declines have slowed, justifying a cautious approach.
    • Upcoming fiscal and trade policies, including potential tax cuts, tariffs, energy shifts, and deregulation, introduce uncertainty around growth and inflation.
  3. Guidance for March:

    • The FOMC may indicate whether March is a "live" meeting for potential adjustments or if an extended pause is more likely.

Conclusion:

ANZ expects the Fed to hold rates steady at the January meeting, citing improved economic fundamentals and policy uncertainties. The Fed’s cautious stance will likely persist, with markets looking for clues on whether March could signal further policy shifts.

Source:
ANZ Research/Market Commentary

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