Rates Stay Put After Last Year’s Reductions
The US Federal Reserve decided on Wednesday to leave interest rates unchanged, holding its key rate at around 3.6% after cutting it three times last year. The move signals caution from policymakers who see an economy that is still growing steadily and a job market showing signs of stability.
In its statement, the Fed said economic growth remains “solid,” upgrading its assessment from last month, when it described growth as “modest.” With hiring holding up and no clear signs of economic slowdown, officials appear in no rush to push borrowing costs lower.
Inflation Still the Sticking Point
While many Fed officials still expect to cut rates later this year, inflation remains the main obstacle. The central bank wants clearer evidence that price pressures are easing toward its 2% target. According to the Fed’s preferred measure, inflation stood at 2.8% in November, slightly higher than a year earlier.
Two policymakers dissented from the decision. Governors Stephen Miran and Christopher Waller both favored another quarter-point cut. Miran, appointed by President Donald Trump last September, has repeatedly pushed for more aggressive reductions. Waller, meanwhile, is reportedly being considered as a potential replacement for Fed Chair Jerome Powell when Powell’s term ends in May.
Political Pressure and What Comes Next
The decision to hold rates is likely to draw more criticism from Trump, who has repeatedly attacked Powell for not cutting rates faster. The Fed’s latest meeting also comes amid heightened political scrutiny, with Powell revealing earlier this month that the Justice Department had issued subpoenas related to his congressional testimony about a costly Fed building renovation.
When the Fed does cut rates, it typically brings down borrowing costs for mortgages, car loans, and business financing, though market forces also play a role. For now, the central bank remains divided over its next move, with some officials wanting to wait for clearer progress on inflation, while others argue that further cuts could help support hiring and economic momentum.
