Points | FOMC - Hold On to Your Cuts

Few changes to the Federal Reserve's policy statement and median rate projections masked an important shift. With further progress on inflation delayed and considerable outlook uncertainty, the Fed is waiting to react to whatever conditions arise from the new administration's policies in whichever manner is appropriate. Both are undetermined and achieving clarity will take time. The Fed is well-aware of downside risks to growth and upside risks to inflation but eschewed deviating from its current restrictive stance without a clearer picture of the world it will need to react to - by holding or cutting. Inflation remains the Fed's primary focus and will temper inclinations to ease, but it would be imprudent to mistake their projections for certainty or their communication "inertia" for an unwillingness to pivot. By withholding policy signaling, the Fed aims to maximize its flexibility to respond.