The United States Federal Reserve has kept interest rates steady in its first rate decision until 2026.
The Fed said on Wednesday that rates would remain at 3.5 to 3.75 percent, defying US President Donald Trump’s call for more aggressive interest rate cuts.
Recommended stories
4 List of itemsEnd of list
“The Committee seeks to achieve maximum employment and inflation at 2 percent over the long term. Uncertainty about the economic outlook remains elevated,” the central bank said in announcing the decision.
A decision was expected on Wednesday. CME FedWatch, an instrument that tracks expectations for monetary policy, has a more than 97% chance the central bank will keep rates steady.
Tracker expects two rate cuts in 2026, with the first cut as early as June most likely.
“Available indicators suggest that economic activity is expanding at a solid pace. Job gains have remained subdued, and the unemployment rate has shown few signs of stabilization,” the central bank said.
The decision comes amid signs of stabilization in the US labor market. The US economy added 584,000 jobs in 2025, marking the slowest annual job growth since 2003. Payrolls increased by 64,000 jobs in October and 50,000 jobs in December. While job growth remained weak, the December figure represented a modest rebound from October, when the economy lost 105,000 jobs, according to the Bureau of Labor Statistics.
There are signs that the labor market will cool further in the coming months. This week, both Amazon and UPS announced thousands of job cuts, some of which were driven by the increased use of artificial intelligence in the workplace.
Another threat to the US economy and job market looms in the form of a government shutdown. It could happen as early as Saturday and, depending on its duration, could cut costs because federal workers are temporarily left without pay.
Political tension
US President Donald Trump’s decision to keep interest rates steady has increased pressure on the central bank to cut rates. Fed Chairman Jerome Powell has long emphasized the independence of the Federal Reserve and Wednesday’s decision. First from Powell slammed the Criminal Division’s investigation into him. The central bank president, whose term ends in May, called the inquiry an “excuse” to press.
“The threat of criminal charges is the result of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the President’s preferences,” Powell commented in early January in response to the subpoena.
Last week, the Supreme Court heard arguments in a case examining whether Trump has legal standing Right of Removal Fed Governor Lisa Cook amid mortgage fraud allegations.
Meanwhile, Stephen Mirren’s tenure comes to an end this week. Trump chose Meeran as a provisional Fill the seat Adriana Coogler vacated in August while a more permanent replacement was sought.
Miran was one of two central bank governors who voted to cut interest rates alongside Christopher Waller.
The developments come as Trump searches for a new Fed chair. He has clearly stated For further interest rate cuts and for the president to voice his opinion.
“Nobody who disagrees with me will be Fed Chair!” Trump said in a post on Truth Social in December.
Political pressure has also caught the attention of global central banks.
“The Federal Reserve is the world’s largest, most important central bank, and we all need it to function well. The Fed’s loss of independence will affect us all,” Bank of Canada Governor Tiff McCallum said Wednesday. Canada’s central bank kept rates steady ahead of the US central bank’s decision.
McCallum was one of the central bank chiefs who issued a joint statement earlier this month endorsing Powell. Last September, McClam said Trump’s efforts to pressure the Fed were starting to hurt markets.
The Dow Jones Industrial Average was flat, as was the Nasdaq, and the S&P 500 was down 0.1 in afternoon trading.