Steady Growth and a Stable Job Market
The US Federal Reserve decided Wednesday to hold its key interest rate at around 3.6%, putting a pause on rate cuts after three reductions last year. The central bank noted that the job market has stabilized and upgraded its assessment of economic growth from “modest” to “solid.”
With hiring steady and no signs of slowing, Fed officials see little urgency to lower rates immediately.
Inflation and Policy Debate
Most policymakers expect rates to fall later this year, but many want to see inflation moving closer to the Fed’s 2% target first. November’s preferred inflation measure came in at 2.8%, slightly higher than the previous year.
Two officials, Governors Stephen Miran and Christopher Waller, disagreed with keeping rates steady, pushing instead for another quarter-point cut. Miran, appointed by former President Trump, has previously advocated for larger cuts, while Waller is under consideration to replace Chair Jerome Powell when his term ends in May.
Political Pressure and the Road Ahead
The Fed’s decision is expected to draw further criticism from Trump, who has long called for sharper rate reductions. This week’s meetings come amid intense scrutiny, including subpoenas from the Justice Department related to Powell’s congressional testimony on a $2.5 billion building renovation.
Lower rates generally reduce borrowing costs for mortgages, car loans, and business credit, though market forces also play a role. The Fed now faces a divided committee: some officials want to wait for inflation to ease, while others favor rate cuts to further support hiring.
