Fed holds interest rates steady, taking a pause from rate cuts to assess the economy

The Federal Reserve held interest rates steady Wednesday, as expected, despite pressure from President Trump for much lower borrowing costs.

The central bank has already cut its benchmark interest rate three times since September, making it cheaper to borrow money to buy a car, expand a business or carry a balance on a credit card. But with inflation still above target, most Fed policymakers voted to hold their target rate unchanged, in a range between 3.5 and 3.75%.

“The unemployment rate has shown some signs of stabilization,” policymakers said in a statement. “Inflation remains somewhat elevated.”

Fed governors Chris Waller and Stephen Miran dissented, saying they would have preferred to cut the benchmark rate by a quarter percentage point.

President Trump wants much lower interest rates, and he’s waged an unusually aggressive campaign to push the Fed in that direction, even though the central bank is designed to be insulated from political interference.

Trump has tried to fire Fed Governor Lisa Cook, which would allow him to replace her with someone who would support bigger rate cuts. So far, that effort has been blocked by the Supreme Court.

Fed also targets Powell

Trump has also threatened to fire Fed Chairman Jerome Powell. While Powell has generally tried to avoid getting dragged into a conflict with the president, he pushed back earlier this month after the Justice Department served the central bank with subpoenas, as part of an investigation of cost overruns at the Fed’s headquarters.

“Public service sometimes requires standing firm in the face of threats,” Powell said in an unusually combative video statement. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation.”

Powell’s term as Fed chair ends in May, so he will likely preside over two more rate-setting meetings. Trump is expected to nominate a new Fed leader soon. Powell has the option to remain on the Fed’s governing board for two more years, which would limit the president’s opportunities to install more malleable policymakers on the board.

Concern about a softening job market led the central bank to cut its benchmark rate by a quarter percentage point at each of its last three meetings in September, October and December. Job growth has slowed sharply over the last year, and the unemployment rate has inched up to 4.4%.

A report from the Conference Board Tuesday showed that concerns about job security are weighing on consumer confidence.

But Fed policymakers have to balance their worries about slower job growth with a watchful eye on inflation. Although price hikes have slowed, inflation remains well above the Fed’s target of 2%.