The Federal Reserve kept interest rates unchanged on Wednesday, despite heavy pressure from President Donald Trump to lower borrowing costs.
After cutting rates three times last year, Fed officials now say inflation remains too high and the economy too stable to justify further reductions.
Unemployment has steadied and economic growth has held up, even as price pressures remain above the Fed’s 2 percent target.
Those earlier cuts brought the Fed’s benchmark rate to a range of 3.50 percent to 3.75 percent, after hiring slowed sharply following Trump’s sweeping tariffs last April. Since then, solid growth and relatively low unemployment have pushed policymakers into a wait-and-see stance.
'There was broad support on the committee for holding today,' Powell said. He noted some tension between employment and inflation, but said downside risks to both may have 'diminished a bit.'
The decision is likely to deepen tensions with Trump, who has repeatedly called for large rate cuts. Since returning to the White House, the president has escalated attacks on the Fed, moves officials warn could threaten the central bank’s independence.
Economists say the data supports holding rates steady. ‘While the Fed has been politically pressured to cut rates, it is not pressed by the data,’ said EY-Parthenon chief economist Gregory Daco.
'We do think tariffs are likely to move through and be a one time price increase,' Powell said about goods prices.
'Assuming there are no new major tariff increases that are begun,' he added.
FILE - Federal Reserve Chair Jerome Powell speaks at the Federal Reserve, Wednesday, Dec. 10, 2025, in Washington. (AP Photo/Jacquelyn Martin, file)
Financial markets expect the Fed to keep rates unchanged until at least June, according to CME FedWatch.
US stocks continued to hover near record highs on Wednesday following the news and Powell's press conference.
Trump has suggested he is close to naming a new Fed Chair, to replace Powell once his term ends in May. The announcement could come as soon as this week, though it has been delayed before.
The president's efforts to pressure the Fed may have backfired, economists say, as Republicans in the Senate voiced support for Powell and threatened to block Trump's replacement chair.
Addressing a question about why it was important to maintain the Federal Reserve's independence from political influence, Powell said, 'The reason it's important, it's enabled central banks generally not to be perfect but to serve the public well.'
Only 12 of the 19 members of the Fed's rate-setting committee have a vote, including all seven members of the board of governors, the president of the New York Fed, and a rotating group of four presidents from the regional Fed banks.
The Federal Reserve sees its two goals as maintaining maximum employment and stable prices for the US economy.
'Job gains have remained low, and the unemployment rate has shown some signs of stabilization,' the Fed wrote in its statement. 'Inflation remains somewhat elevated.'
Earlier this month the Bureau of Labor Statistics reported that the US added only about 584,000 jobs in 2025, making it the weakest year for employment growth outside of a recession since 2003.
