Fed holds rates steady as inflationary threats loom
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Fed chair Jerome Powell speaks at a press conference. Photo: Andrew Caballero-Reynolds/AFP via Getty Images
The Federal Reserve left interest rates unchanged on Wednesday after three consecutive cuts since late last year.
Why it matters: The Fed is halting rate cuts as inflation looks more persistent, with some officials worried Trump's economic agenda might further ignite price pressures.
Between the lines: The Fed's policy statement released on Wednesday hinted that recent indicators have pointed to a bumpy process in bringing inflation down.
- The policy statement, which is closely watched for subtle changes, no longer included December's language that inflation "has made progress" toward its 2% target. The statement said only that inflation "remains somewhat elevated."
- But the policy statement suggests that Fed officials have upgraded their assessment of the labor market as hiring continues to keep pace. "The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid," according to the policy statement.
- In the previous statement, the Fed said hiring conditions had "eased" and that the unemployment rate had moved up, though it remained historically low.
What they're saying: "I think policy is well positioned," Powell said in his post-statement news conference, noting that the unemployment rate has been "broadly stable now for six months" and inflation falling.
Driving the news: The Fed's decision leaves interest rates at a range of 4.25% to 4.5% — higher than the ultra-low borrowing costs that preceded the pandemic but roughly a full percentage point below last year's peak rates.
- The decision was unanimous. Two separate officials dissented in September and December.
The intrigue: The rate decision is the first since the inauguration of President Trump, who initially nominated Fed chair Jerome Powell in 2017.
- Fed officials last month projected they would cut rates twice in 2025, half as many cuts as previously estimated.
- Those projections also showed inflation remaining elevated for a longer period — a result some Fed officials expect to come from Trump's deportation and tariff policies, according to minutes from the central bank's December policy meeting.
What to watch: The decision sets up renewed criticism of the Fed from the White House, which dates back to Trump's first stint in office.
- Speaking virtually at the World Economic Forum, Trump said he would demand that the Fed lower interest rates — a threat that undermines the central bank's political independence.
- Asked about Trump's demand, Powell did not directly address his comments, saying "I'm not going to have any response or comment whatsoever on what the president said."
- Powell did say he has had no contact with Trump.
Go deeper: What to know about Trump's ability to move interest rates
Editor's Note: This story has been updated to add the Fed's news conference.
