Economy Shows Strength, Cuts Put on Hold
The US Federal Reserve decided on Wednesday to keep interest rates unchanged, pressing pause after cutting rates three times last year. The benchmark rate remains at around 3.6%, a move that reflects growing confidence in the health of the economy.
In its statement, the Fed said the labour market appears to have stabilised and described economic growth as “solid,” an upgrade from last month’s more reserved assessment. With hiring holding up and no clear signs of economic strain, officials see little urgency to push borrowing costs lower just yet.
Inflation Still the Sticking Point
While most policymakers expect rates to fall again later this year, many want clearer proof that inflation is heading back toward the Fed’s 2% target. The central bank’s preferred inflation gauge showed prices rising at an annual rate of 2.8% in November, slightly higher than a year earlier.
The decision was not unanimous. Governors Stephen Miran and Christopher Waller voted against holding rates steady, arguing for another quarter-point cut. Miran, appointed by President Donald Trump last September, has consistently pushed for more aggressive reductions. Waller is also reportedly being considered by the White House as a potential successor to Fed Chair Jerome Powell, whose term ends in May.
Political Pressure and an Uncertain Path Ahead
The Fed’s move is likely to draw more criticism from President Trump, who has repeatedly attacked Powell for not cutting rates faster. This week’s meeting took place amid intense political pressure, with Powell recently confirming that the Fed received subpoenas tied to a Justice Department investigation into his congressional testimony over a $2.5 billion building renovation.
When the Fed lowers its key rate, borrowing typically becomes cheaper for mortgages, car loans and business financing, although market conditions also play a role. For now, the bigger question is how long the central bank will stay on hold. Policymakers remain divided between those who want inflation to cool further before acting and those who believe additional cuts are needed to keep the job market strong.
