Federal Reserve policymakers voted Wednesday to hold interest rates steady in its first rate decision of the year.

The Federal Reserve on Wednesday opted to hold interest rates steady amid rising inflation, ending a streak of lowering rates at its previous three meetings. After a two-day meeting of its monetary policy committee in Washington,

Recent data from the Bureau of Labor Statistics shows the cost of living continues to outpace earnings, leaving many Americans struggling to make ends meet.

The Consumer Price Index report for January is expected to show broadly unchanged annual inflation according to nowcasts. That may be broadly good news for the Fed.

The dynamic is reflected in the chart below, which shows low-income inflation increases outpacing those for the other four quintiles since 2006, and over a nearer-term timeframe. From the end of 2005 through June 2024 — the latest available data — the lowest-income cohort saw prices increase 64%,

Entering 2025, models from forecasting companies like Trading Economics anticipate inflation rates between 2.4% and 2.9% between the end of 2024 and the start of 2026. Unfortunately, actually predicting inflation can be difficult, as rates can be affected by a variety of factors, including political climates and supply-chain interruptions.

The Consumer Price Index rose 2.9 percent from a year earlier, but a measure of underlying inflation was more encouraging.

And all this productivity is why wage growth keeps beating inflation, said Betsey Stevenson, a professor of economics at the University of Michigan. “Real wage growth has to come from productivity growth. Because we’re doing more with less, we get more in the end,” she said.

The better-than-expected data sent the blue-chip Dow Jones Industrial Average surging more than 700 points, or 1.7%, as investors felt renewed confidence that the Fed will cut rates multiple times this year. In recent trading, fed-fund futures showed the chances of more than one cut rising to 46%, from 35% on Tuesday, according to CME Group data.

Shelter costs were 4.6% higher in December than a year earlier, and they account for more than a third of the consumer price index.

Australian consumer prices rose at the slowest pace in almost four years in the December quarter, while a pullback in housing costs helped cool core inflation and open the door to a cut in interest rates as early as next month.

Aussie mortgage holders could get a rate cut as soon as February after fresh figures show inflation is falling faster than anticipated.