Economy|Business and EconomyUS Federal Reserve holds interest rates steady despite political pressureThe central bank will maintain rates at 3.5 to 3.75 percent and warned of ‘elevated’ economic uncertainty.
The United States Federal Reserve has announced that it will maintain interest rates between 3.5 and 3.75 percent. This decision marks the first rate decision of 2026.
The United States Federal Reserve has announced that it will maintain interest rates between 3.5 and 3.75 percent. This decision marks the first rate decision of 2026.
The Federal Reserve, in its release, stated its objective to achieve maximum employment and maintain inflation at a rate of 2 percent over the long term. The economic outlook remains uncertain, according to the central bank.
The decision to hold rates steady was anticipated, with the CME FedWatch tool indicating a more than 97 percent likelihood of this outcome. The tool also forecasts the possibility of two rate cuts in 2026, with the first potential cut occurring in June.
Economic indicators suggest a solid expansion in economic activity, with job gains remaining low and the unemployment rate showing signs of stabilization. In 2025, the U.S. economy added 584,000 jobs, the lowest annual growth since 2003. However, December's payroll increase of 50,000 jobs marks a modest rebound from October's loss of 105,000 jobs, as reported by the Bureau of Labor Statistics.
Recent corporate announcements, including significant job cuts by Amazon and UPS, indicate potential further cooling of the labor market, partly due to increased use of artificial intelligence in the workplace.
The United States Federal Reserve has announced that it will maintain interest rates between 3.5 and 3.75 percent.
A potential government shutdown poses an additional risk to the economy, which could impact federal workers' pay and reduce spending.
The decision to maintain interest rates occurs amid increased political pressure for rate cuts. Federal Reserve Chairman Jerome Powell has emphasized the institution's independence, recently responding to a Department of Justice investigation as a means to exert pressure.
During a post-decision news conference, Powell advised his successor to avoid political entanglements. A recent Supreme Court case involving Fed Governor Lisa Cook also highlighted political tensions, with Powell attending in support. Treasury Secretary Scott Bessent criticized Powell's attendance as politically motivated.
Fed Governor Stephan Miran's term is concluding, following his temporary appointment by President Trump. Miran was among those who voted for rate reductions.
The search for a new Federal Reserve chair is ongoing, with President Trump indicating the importance of alignment with his views on interest rate policy. This political climate has captured the attention of global central banks, focusing on the importance of Federal Reserve independence.
Market reactions include a flat Dow Jones Industrial Average, a stable Nasdaq, and a slight 0.1 percent decline in the S&P 500 during midday trading.
Based on reporting by Al Jazeera.