Economy Holds Steady
The US Federal Reserve decided on Wednesday to keep its key interest rate at roughly 3.6%, putting a pause on cuts after three reductions last year. Officials noted that the job market has stabilized and that economic growth is now “solid,” an upgrade from last month’s “modest” assessment. With hiring steady and no signs of slowdown, the Fed sees little urgency for further cuts.
Inflation and Policy Divisions
While many Fed officials expect borrowing costs to fall later this year, they want to see inflation move closer to the 2% target before acting. The Fed’s preferred inflation measure came in at 2.8% in November, slightly higher than last year. Two governors, Stephen Miran and Christopher Waller, dissented from the decision, favoring another quarter-point cut. Miran, appointed by former President Trump, has consistently pushed for bigger reductions, while Waller is under consideration to replace Chair Jerome Powell in May.
Political Pressure and Future Outlook
The Fed’s hold on rates comes amid heightened scrutiny from the Trump White House, which has repeatedly criticized Powell for not cutting rates more sharply. Powell recently revealed that the Justice Department issued subpoenas in a criminal investigation linked to his congressional testimony on a $2.5 billion building renovation.
Lower interest rates can reduce borrowing costs for mortgages, car loans, and business loans, though market forces also play a role. The central question now is how long the Fed will maintain its current stance, as the committee remains split between prioritizing inflation control and supporting employment.
