THE Federal Reserve The central bank voted on Wednesday to pause the recent series of interest rate cuts, as the central bank faces questions about its independence and awaits a new leader.
Meeting market expectationsthe central bank’s Federal Open Market Committee voted to keep its key interest rate in a range between 3.5% and 3.75%. The decision halted three-quarters of a consecutive percentage point reduction, billed as holding measures to guard against possible slowdowns in the labor market.
By voting in favor of maintaining this line, the committee also revised upwards its assessment of economic growth. He also eased concerns about the job market versus inflation.
“Available indicators suggest that economic activity expanded at a sustained pace. Job creation remained weak and the unemployment rate showed some signs of stabilization,” the report said. post-meeting statement said. “Inflation remains somewhat elevated.”
Importantly, the statement also deleted a clause indicating that the commission saw a higher risk of a weakening of the labor market than of an increase in inflation. That would argue for a more patient approach to policy as officials view the Fed’s two goals, low inflation and full employment, as more balanced.
There was little indication of what would come next, with markets expecting the Fed to wait until at least June before adjusting its benchmark rate again.
“In considering the magnitude and timing of additional adjustments to the federal funds rate target range, the Committee will carefully evaluate incoming data, the evolving outlook, and the balance of risks,” the statement said, repeating language inserted in December that markets viewed as an abandonment of the easing cycle that began in September 2025.
As has been the case in recent meetings, there has been some dissent.
Governors Stephen Miran and Christopher Waller voted against the measure, both advocating another quarter-point reduction. Both were appointed by the president Donald Trumpwith Miran filing for an unexpired seat on the board in September 2025 and Waller appointed during Trump’s first term. Miran’s term expires Saturday, while Waller interviewed for Fed chairman position but is considered a long-term project.
The routine nature of the decision comes at a time when nothing is routine for the central bank.
Chair Jerome Powell He has just two meetings left before his term as Fed chief ends, ending a tumultuous eight years at the Fed marked by a global pandemic, a sharp recession and a seemingly endless series of battles with Trump. He will answer questions from press at 2:30 p.m. ET.
Most recently, the Justice Department subpoenaed Powell regarding extensive renovations to the Fed’s headquarters in Washington, DC. Before that, the president had repeatedly threatened to fire Powell and actually moved to fire Gov. Lisa Cook, a matter that is now awaiting a decision by the U.S. Supreme Court.
The battle over the Fed’s independence, or ability to operate without political interference, has highlighted all of these tensions. In confirming the Justice Department’s investigation, Powell, unusually candid, attributed the threat to Trump’s efforts to control monetary policy. Previous presidents have also criticized the Fed’s decisions and tried to force policymakers to cut rates, but none have been as aggressive or public about it as Trump.
The Fed also has to deal with a difficult economic context.
Growth, measured by the broadest metric, gross domestic product, has been robust. The third quarter grew at a rate of 4.4% and the last three months of the year registered at a rate of 5.4%, according to the Atlanta Fed.
At the same time, hiring is slow in the job market, amid a crackdown on illegal immigration by the Trump administration. However, layoffs were also moderate, with the trend in initial jobless claims at a two-year low.
Inflation, however, proved more problematic. Despite hitting a 40-year high in 2022, the rate remains closer to 3% than the Fed’s 2% target, raising concerns among some FOMC officials who want to either pause or eliminate rate cuts until there is more evidence of slowing price increases.
Trump’s tariffs remain in the background when it comes to inflation, with Fed economists generally viewing the duties as adding short-term pressures that will ease later this year.
Futures markets anticipate a maximum of two rate cuts in 2026 and none in 2027, whoever the next Fed president is. Prediction markets are pointing to BlackRock fixed income chief Rick Rieder as the likely candidate to succeed Powell.
