By Howard Schneider
Washington — The US Federal Reserve kept interest rates unchanged on Wednesday, citing still-elevated inflation alongside solid economic growth, and gave little indication in its latest policy statement when borrowing costs might fall again.
“Economic activity has been expanding at a solid pace,” Fed policymakers said in the statement after voting 10-2 to maintain the central bank’s benchmark interest rate in the 3.50%-3.75% range after a two-day meeting.
Christopher Waller, a contender to replace Fed chair Jerome Powell when his term as central bank chief ends in May, and Stephen Miran, on leave from his job as an economic adviser at the White House, dissented in favour of a 25 basis-point rate cut.
The Fed’s statement offered no hint about when another reduction in borrowing costs might come, noting that “the extent and timing of additional adjustments” to the policy rate would depend on incoming data and the economic outlook.
Inflation “remains somewhat elevated”, while the job market has “shown some signs of stabilisation,” it added.
Though the Fed noted that “job gains have remained low”, it also removed language from its previous statement that downside risks to employment had risen — an indication policymakers as a group are becoming less concerned about a rapid downturn in the labour market.
In the lead-up to this week’s meeting, Fed policymakers had largely characterised the job market as roughly in balance, with smaller gains matching the slower growth in the numbers of those seeking employment as a result of the Trump administration’s stricter immigration policies.
The unemployment rate fell to 4.4% in December.
The decision to maintain borrowing costs at their current level puts the Fed’s current monetary easing cycle — which started near the end of the Biden administration and continued after a pause of roughly nine months during President Donald Trump’s second term in the White House — on hold again after three 25 basis-point reductions at the central bank’s final three meetings of 2025.
The rate cut at the December 9-10 meeting left the policy-setting Federal Open Market Committee unusually divided. Three of its 12 voting members dissented, with one in favour of an even deeper cut and two favouring no reduction.
Those same divisions have carried into 2026, and recent economic data has done little to change the outlook for those officials most concerned that inflation is not progressing back to the central bank’s 2% target, or for those more worried about a rise in the unemployment rate if credit conditions aren’t loosened to encourage more spending and investment.
It’s a debate that could shape the first weeks in office of whoever is named to replace Powell as chair, a decision that Trump is expected to announce soon. Powell’s successor is expected to be in place to run the central bank’s June 16-17 policy meeting.
Investors expect the Fed to keep rates on hold until then.
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