Fed Keeps Interest Rates Unchanged and Buys Treasury Bills

Summary

The Federal Reserve maintained the federal funds rate at 3.5%-3.75%, ending a series of three consecutive rate cuts from the latter half of 2025.AASTOCKS+ 3 The decision was widely anticipated by the market.QQ News The Fed’s statement noted that economic activity is expanding at a solid pace and removed previous language about downside risks to the labor market, signaling a more balanced view between its employment and inflation mandates.Zhitong+ 3 While the possibility of future rate cuts was mentioned, no specific conditions were provided, leading markets to expect rates to remain on hold until at least June.AASTOCKS+ 3 The decision was not unanimous, with two officials dissenting.AASTOCKS+ 2 The ongoing purchases of short-term Treasury bills are a separate technical operation to manage liquidity, not a change in monetary policy stance.

Impact Analysis

So they’re basically admitting the ‘mid-cycle adjustment’ is over. The key signal isn’t the hold itself—everyone saw that coming.Huxiu It’s the language change. They dropped the wording about labor market risks, which was their main excuse for the dovish tilt.AASTOCKS+ 2 This is a subtle but clear hawkish pivot to a neutral stance. They’re telling the market to stop pricing in imminent cuts. The economy is ‘solid,’ inflation is still a bit high, and they’re comfortable waiting on the sidelines.AASTOCKS

This pushes the timeline for any potential cut out to June at the earliest, killing the narrative for a spring easing.Sina Finance+ 2 The dissent from two officials is just noise; the core committee is unified on this pause.AASTOCKS Bottom line: the Fed put is moving further out of the money. This should support the dollar and put a cap on equities for now. The trade is to be short the front-end of the curve; the market was too dovish and needs to reprice for a Fed that’s firmly on hold.