- The Federal Reserve left its policy rate unchanged at 3.50–3.75% this month after a 25 basis-point cut in December.
- Officials upgraded the economy’s outlook to “solid” from “moderate” while calling inflation “somewhat elevated.”
- The committee noted the job market shows “some signs of stabilization” and removed language that “downside risks to employment rose in recent months.”
- Fed Chair Jerome Powell said activity is expanding at “a solid pace,” but housing remains weak and a recent government shutdown slowed recovery.
- Governors Chris Waller and Stephen Miran reportedly preferred an additional 25 bps cut; markets slipped and the Fed offered no update on a planned 2026 cut.
The Federal Reserve kept its benchmark interest rate at 3.50–3.75% this month, following a 25 basis-point cut in December, citing recent economic readings and risks to its dual mandate. Officials said the decision reflected a stronger GDP outlook alongside persistent inflation and mixed labor-market signs.
Policy members upgraded their assessment of the U.S. economy to “solid” from “moderate,” citing a strong third-quarter GDP and expectations for a robust fourth quarter. They still described inflation as “somewhat elevated,” while noting the job market has shown “some signs of stabilization.”
The committee removed earlier language that “downside risks to employment rose in recent months.” Officials instead stated the “Committee is attentive to the risks to both sides of its dual mandate.” Jerome Powell said economic activity is expanding at “a solid pace.”
Policymakers also pointed to weak activity in the housing sector and said a recent government shutdown slowed potential improvement in jobs and broader growth. Those factors contributed to the decision to hold rates steady rather than change policy immediately.
Two governors, Chris Waller and Stephen Miran, reportedly disagreed with the hold and preferred a further 25 basis-point cut. The decision came amid public pressure for lower rates from Trump and rising tensions between the administration and the central bank.
Jerome Powell disclosed that the administration opened a criminal investigation earlier this month into testimony he gave last summer about the Fed’s headquarters renovation. Markets reacted modestly: the Dow Jones and S&P 500 slipped a few points after the announcement. The Fed did not update its earlier indication of at least one additional rate cut in 2026.
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