Fed Holds Rates Steady Despite Political Pressure

The US Federal Reserve kept interest rates unchanged at 3.50 percent to 3.75 percent in its first policy meeting of 2026, signalling confidence in the economy and resistance to mounting political pressure.

What the Fed Decided

The Federal Reserve maintained the policy rate, citing a solid pace of economic activity. Officials pointed to steady GDP growth, a stabilising labour market, and inflation that remains above comfort levels as reasons to stay on hold.

A Rare Dissent

Two governors, Stephen Miran and Christopher Waller, dissented from the decision and voted for a 25 basis point rate cut. Their view contrasts with the broader committee consensus that inflation risks still warrant caution.

Context: After Three Straight Cuts

The pause follows three consecutive rate cuts in prior meetings, when the Fed responded to signs of cooling in the labour market. Current data, however, suggests conditions have stabilised rather than weakened further.

Political Backdrop

The decision comes amid renewed pressure from Donald Trump, who has publicly pushed for lower rates and criticised the central bank. Some of these actions have been viewed as attempts to influence Fed independence.

Fed Chair Jerome Powell addressed these concerns directly, criticising threats of criminal charges against central bank officials and reiterating that monetary policy decisions must remain free from political interference.

What to Watch Next

While the committee appears aligned on a near-term pause, debates continue around the timing and conditions for future cuts. Inflation trends and labour market data are likely to remain the key triggers for any policy shift.