Economy Shows Strength
The US Federal Reserve decided Wednesday to keep its key interest rate at about 3.6%, pausing after three cuts last year. In a statement, the central bank noted that the job market has stabilized and described economic growth as “solid,” an improvement from last month’s “modest” assessment.
With hiring steady and the economy expanding, Fed officials see little urgency to lower rates further at this time.
Inflation and Policy Debate
Although many policymakers expect borrowing costs to fall later this year, most want to see inflation trending closer to the Fed’s 2% target before taking action. In November, the Fed’s preferred inflation measure was 2.8%, slightly higher than a year earlier.
Two officials, Governors Stephen Miran and Christopher Waller, disagreed with holding rates steady, advocating for an additional quarter-point cut. Miran, appointed by former President Trump, has repeatedly pushed for larger cuts, while Waller is being considered as a potential replacement for Chair Jerome Powell when his term ends in May.
Political Pressure and Next Steps
The Fed’s decision is likely to draw further criticism from Trump, who has long argued for sharper short-term rate reductions. Officials are meeting this week under intense scrutiny, with Powell revealing earlier in January that the Justice Department issued subpoenas related to a criminal investigation into his congressional testimony regarding a $2.5 billion building renovation.
Lower rates typically reduce borrowing costs for mortgages, car loans, and business credit, though market conditions also affect rates. The main question now is how long the Fed will maintain its current stance, as the committee remains divided between those prioritizing inflation control and those focused on supporting employment.
