The U.S. Federal Reserve on Wednesday held interest rates unchanged, citing persistently high inflation amid solid economic growth, and gave little indication in its latest policy statement of when borrowing costs will fall again.
“Economic activity is expanding at a solid pace,” Fed policymakers said in a statement after a two-day meeting in which they voted 10-2 to keep the U.S. central bank’s benchmark interest rate unchanged in the range of 3.50% to 3.75%.
Christopher Waller, the candidate to replace Fed Chairman Jerome Powell, whose term as head of the central bank expires in May, and Governor Stephen Milan, who is on leave as White House economic adviser, both voted against cutting rates by a quarter of a percentage point.
The Fed’s statement said the “extent and timing of further adjustments” to policy rates would depend on future data and the economic outlook, and gave no hint as to when further cuts to borrowing costs might occur.
Meanwhile, the central bank said inflation “remains moderately high” while the job market is “showing signs of stabilization”.
The Fed noted that “job growth remains low,” but removed language from an earlier statement that said downside risks to employment had increased. This shows that policymakers as a whole are becoming less concerned about the rapid deterioration of the labor market.
Ahead of this week’s meeting, Fed policymakers characterized the job market as largely balanced, with modest gains consistent with slowing job-seeking growth as a result of the Trump administration’s tough immigration policies. The unemployment rate fell to 4.4% in December.
Chairman Powell is scheduled to hold a press conference at 2:30 p.m. ET (7:30 p.m. Japan time) to discuss policy statements and the economic outlook.
The Fed remains divided
The decision to keep borrowing costs at current levels means the Fed’s current monetary easing cycle, which began near the end of the Biden administration and continued after a nearly nine-month hiatus during President Donald Trump’s second term in the White House, will be halted again after quarter-point cuts at the central bank’s final three meetings in 2025.
The rate cut at its Dec. 9-10 meeting caused an unprecedented split in the policy-making Federal Open Market Committee. Of the 12 voting members, three were opposed, one in favor of deeper cuts and two in favor of no cuts at all.
Similar divisions carry over into 2026, with recent economic data doing little to change the outlook for officials most concerned that inflation has not returned to the central bank’s 2% target or more concerned about rising unemployment if credit conditions are not eased to encourage more spending and investment.
It’s a discussion that could shape the first few weeks of Mr. Powell’s nomination to replace Mr. Powell at the head of the Fed, with Mr. Trump expected to announce a decision soon. Powell’s successor is expected to be responsible for running the central bank’s policy meeting, which will be held June 16-17. Investors now expect the Fed to keep interest rates on hold until then.
(Reporting by Howard Schneider; Editing by Paul Simao)
