Even though 2025 has only just begun, there are already big changes unfolding that could impact your wallet. Here are some of the main financial headlines so far, and what they might mean for you:
Federal Reserve Holds 2025 Rates Steady
At the Fed’s end of January meeting, they opted to keep the federal rates where they are instead of implementing another cut. Currently, the federal funds rate is at 4.25 percent to 4.50 percent.
The Fed also said they plan to wait until Q2 to consider making another cut, and do not intend to drop rates more than half a percentage point this year. That decision is a departure from their announcement at the September meeting to cut rates a full percentage point in 2025.
Federal Reserve Chair Jerome Powell said that the economy is in a good place right now, and with inflation rates creeping back up, there is no reason to make another cut at this time.
For borrowers, the Fed’s decision means that rates are most likely not to see meaningful change anytime soon. Future cuts will depend on inflation and the strength of the economy as the year goes on.
2025 Inflation creeps up
The U.S. inflation rate crept back up to 3 percent in January, the highest it’s been in 6 months. This was also higher than the 2.9 percent economists were anticipating.
The cost increase last month affected expenses like car insurance, airfare, medicine and groceries.
That uptick in inflation – plus talks of tariffs and other monetary policy changes – make it likelier that the Fed may continue to hold off on further interest rate cuts for a while. Experts will be watching those indicators closely in the coming months.
2025 Markets and Economy
Since November, the S&P 500, the Dow Jones Industrial Average and Nasdaq have all hit record highs. Bitcoin prices, however, have stalled out, which some experts have noted as an indicator of declining liquidity.
We know that market rallies don’t last forever, and the potential for tariffs, layoffs and higher inflation in the coming months could lead to more market volatility.
The best way forward is to keep an eye on your long-term plans, and try not to get derailed by uncertainty. 2025 may prove to be a bumpy ride, but a strong, well-balanced portfolio is designed to weather storms.
What to do Now
Economic uncertainty can be stressful, but there are steps you can take to make it feel more manageable:
- Prioritize paying down debt
- Funnel more money to your emergency fund
- Keep track of your budget and watch for any areas of excessive spending
- Freeze your credit to protect yourself from identity theft
Here are a few more articles to help you protect yourself and your finances during down times:
- Financial Adjustments to Hedge Against Inflation
- How do Stocks Perform During Down Times?
- Managing Investments During a Financial Crisis
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes you too should have access to financial resources and fee-only financial planning. For more information on the services offered, contact Katie today.
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