Economic Growth Holds Steady
The US Federal Reserve decided on Wednesday to keep its key interest rate at about 3.6%, pausing after three cuts last year. Officials noted that the job market has stabilized and economic growth is now considered “solid,” an upgrade from last month’s “modest” assessment.
With hiring holding strong and no signs of economic slowdown, the Fed sees little urgency to lower rates further right now.
Inflation and Policy Divisions
While most Fed officials expect to ease borrowing costs later this year, they want to see inflation move closer to the 2% target first. November’s preferred inflation measure stood at 2.8%, slightly higher than a year ago.
Two officials dissented from the decision: Governors Stephen Miran and Christopher Waller, both favoring a small rate cut. Miran, appointed by former President Trump, has repeatedly supported faster reductions, while Waller is under consideration as a potential successor to Chair Jerome Powell, whose term ends in May.
Political Pressure and Future Outlook
The Fed’s hold decision is likely to spark criticism from Trump, who has long pushed for sharper rate cuts. Officials are also facing added scrutiny as Powell revealed the Justice Department has issued subpoenas in a criminal investigation regarding his congressional testimony about a $2.5 billion building renovation.
Interest rate changes affect borrowing costs for mortgages, car loans, and business loans, though market conditions play a role too. The central question now is how long the Fed will maintain this pause, as policymakers remain split between prioritizing inflation control and supporting employment.
