Rates Stay Put After a Year of Cuts
The US Federal Reserve decided on Wednesday to keep interest rates unchanged, pressing pause after cutting its key rate three times last year. The benchmark rate remains at around 3.6%, reflecting growing confidence among policymakers that the economy is holding up well.
In its statement, the Fed said economic growth remains “solid,” upgrading its outlook from the “modest” pace described a month earlier. Officials also pointed to signs that the job market has stabilised, reducing the urgency to lower borrowing costs further for now.
Inflation Still the Key Question
Despite the pause, most Fed policymakers still expect to cut rates again later this year. However, many want clearer evidence that inflation is moving closer to the central bank’s 2% target before taking that step. According to the Fed’s preferred measure, inflation stood at 2.8% in November, slightly higher than a year earlier.
The decision was not unanimous. Governors Stephen Miran and Christopher Waller voted in favour of another quarter-point cut. Miran, appointed by President Donald Trump last September, has consistently pushed for deeper cuts, while Waller 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 Fed’s decision is likely to intensify criticism from President Trump, who has repeatedly attacked Powell for not cutting rates more aggressively. The central bank is operating under unusual political pressure, with Powell recently confirming the Fed received subpoenas linked to a Justice Department investigation into his congressional testimony about a costly building renovation.
For consumers and businesses, interest rate decisions matter because lower rates typically reduce borrowing costs for mortgages, car loans, and business financing, though market forces also play a role. The big question now is how long the Fed will stay on hold. Policymakers remain divided between those who want inflation firmly under control before cutting again and those who believe lower rates are needed to further support hiring and economic growth.
