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Federal Reserve Holds Rates and Unveils Strategy: Powell Rules Out Immediate Cut and Aims for Balance Sheet Reduction in March

The Federal Reserve held its first meeting of the year on Wednesday and decided to hold rates at 5.25% - 5.50%. Jerome Powell, chairman of the Fed, said that members of the Federal Open Market Committee want to feel more confident that inflation is on a sustainable path toward their 2% target before cutting interest rates. Which is why he virtually ruled out a cut as soon as March, leading the market to adjust expectations for a first reduction only in May. The Fed Chairman said he sees a greater risk of inflation stabilizing significantly above the Fed's 2% target than a further increase in inflation. Finally, Powell announced that the Fed will discuss reducing its balance sheet at its March meeting.

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