The US Federal Reserve on Wednesday held interest rates steady at its first policy gathering this year, citing robust economic growth, as the central bank resists US President Donald Trump’s mounting pressure for cuts.
Trump has sharply escalated his targeting of the Fed since returning to the White House in January last year, seeking to oust a key official among its leadership in what Fed Chairman Jerome Powell said could be the “most important legal case” in the institution’s long history.
However, on Wednesday, the Fed voted 10-2 to maintain rates at a range of 3.50 percent to 3.75 percent, an outcome that was widely expected as officials await more data on the world’s biggest economy.
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In a statement, policymakers flagged that economic activity was “expanding at a solid pace,” while the unemployment rate showed some “signs of stabilization.”
The rate-setting Federal Open Market Committee saw two dissents.
Fed governors Stephen Miran and Christopher Waller — the latter seen as a candidate to succeed Powell — backed a quarter-percentage-point rate cut instead.
The Fed has made quarter-point cuts at its last three policy meetings, as officials worried about the cooling jobs market. However, solid GDP growth, relatively steady unemployment and stubborn inflation have provided reasons to pause cuts, putting officials again at odds with Trump, who has repeatedly urged for lower interest rates.
Policymakers have warned that Trump’s actions could threaten the bank’s independence from politics.
However, Powell stressed at a press briefing on Wednesday that he did not believe the bank would lose its independence.
Trump has sought to oust Fed Governor Lisa Cook over mortgage fraud allegations, while his administration launched an investigation into Powell over the bank’s headquarters renovation.
In a rare rebuke earlier this month, Powell criticized the threat of criminal charges against him, saying this was about whether monetary policy would be “directed by political pressure or intimidation.”
He did not elaborate on Wednesday on the probe.
The Fed is “in no hurry to cut interest rates again,” Navy Federal Credit Union chief economist Heather Long said, adding that she saw policymakers “in a stalemate.”
“Leaders like Miran and Waller who were worried about the labor market don’t have as many supporters now, and similarly, Fed leaders who were concerned about inflation also seem to have backed off,” she added.
Long said she expects a “shake-up” to come as Powell’s term as Fed chairman ends in May, with Trump’s new appointee taking office.
Powell said the Fed would let economic data “light the way” on the future path of interest rates.
A weakening labor market could tip the balance in favor of a further rate reduction, while cooling inflation allows for lower levels.
He said inflation from tariffs could top out in the “middle quarters” of the year, but cautioned that this was hard to guess with precision.
While much of the price effects from Trump’s tariffs have already percolated through the economy, Powell said that “we need to keep our eye on inflation and not declare victory prematurely.”
Looking ahead, all eyes are on how Powell’s successor shapes Fed policy.
Asked about advice for the new chairman, Powell said: “Don’t get pulled into elected politics.”
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