The Federal Reserve said Wednesday that it is leaving its benchmark interest rate unchanged, marking the central bank’s first pause after three consecutive rate cuts last year.
The Fed maintained its federal funds rate — what banks charge each other for short-term loans — in its current range of 3.5% to 3.75%. The decision matched expectations from Wall Street economists, according to financial data service FactSet.
The central bank is grappling with two potentially troubling economic trends: A softer labor market and an inflation rate that remains well above the central bank’s annual target of 2%. At the same time, the U.S. economy continues to expand at a fast pace, with the country’s third-quarter growth rising at a 4.4% annual rate, far outpacing economist forecasts.
“The Fed is likely on an extended pause with strong activity data and signs of stabilization in the labor market suggesting little need to take out further insurance,” said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, in an email after the announcement.
In its Wednesday statement, the Federal Reserve cited a “solid pace” of economic activity and an unemployment rate that remains low. It noted that inflation “remains somewhat elevated.” Prices rose at a 2.7% annual pace in December, according to the latest Consumer Price Index.
The Federal Open Market Committee, the 12-person voting committee that sets the central bank’s rate decisions, wasn’t unanimous in its decision. Ten of the panel’s members, including Fed Chair Jerome Powell, voted to hold the benchmark rate steady, while Stephen Miran and Christopher Waller voted to lower the rate by 0.25 percentage points, the Fed said.
Today’s decision comes amid weeks of turmoil involving the Fed, including a Department of Justice investigation into Fed Chair Jerome Powell, a probe that Powell said is a pretext for weakening the Fed’s independence. The Supreme Court is also currently weighing whether to allow Fed Governor Lisa Cook to keep her job after Mr. Trump sought to fire her.