WASHINGTON — The Federal Reserve kept interest rates unchanged Wednesday, signaling little urgency to resume cuts after a contentious series of reductions last year.
Officials voted 10–2 to hold the benchmark federal-funds rate in a range of 3.5% to 3.75%, a move widely expected by investors.
Powell: Fed ‘Well Positioned’ to Wait
Fed Chair Jerome Powell said recent economic data has improved since the central bank’s last meeting, pointing to stronger growth and tentative stabilization in the labor market.
“We’re not trying to articulate a test for when to next cut,” Powell said at a news conference. “What we’re saying is we’re well positioned.”
His remarks suggest the Fed is comfortable keeping rates steady unless inflation shows clearer progress toward its 2% target or the labor market weakens further.
Markets React Calmly
Financial markets showed little reaction to the decision. Major stock indexes were mostly unchanged, while the yield on the 10-year Treasury note edged up slightly to 4.25%.
Former senior Fed economist William English said the central bank may remain on hold for an extended period. “They’re likely on hold for a while unless there’s a big surprise,” he said.
Balancing Inflation and Employment Risks
Inflation slowed in 2023 and 2024 but has remained above the Fed’s target for the past year, reinforcing the case for patience. At the same time, job growth has cooled sharply, though the unemployment rate has stabilized.
“We still have some tension between employment and inflation, but it’s less than it was,” Powell said, calling the current conditions “a very challenging and quite unusual situation.”
Some officials indicated they are increasingly willing to look past tariff-driven price increases, viewing them as one-time effects. Others remain cautious, noting inflation has exceeded the Fed’s goal for five consecutive years.
Dissents and Political Pressure
Two Fed governors appointed by President Donald Trump dissented from the decision, favoring a quarter-point rate cut. Governor Christopher Waller, considered a potential successor to Powell, and Governor Stephen Miran both voted against holding rates steady.
The decision came amid heightened political pressure. The Justice Department recently opened a criminal investigation into Powell over statements made to Congress, a move the Fed chair has characterized as politically motivated.
Trump’s advisers have indicated the president is close to naming a replacement for Powell, whose term ends in May.
Growing Divisions at the Fed
English warned the political environment could reshape how the Fed operates. “Normally the Fed’s an institution that operates in a kind of consensus manner,” he said. With Powell’s tenure ending, he fears officials are becoming more entrenched in their positions.
Despite the tensions, Powell said Wednesday’s decision reflected broad agreement across the committee.
“This meeting,” he said, “had very strong support.”
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