Economy Shows Strength
The US Federal Reserve decided to pause its interest rate cuts on Wednesday, keeping the key rate at about 3.6% after three reductions last year. In a statement, the Fed noted that the job market has stabilised and economic growth is now considered “solid,” an upgrade from last month’s “modest” assessment.
With hiring steady and no signs of a slowdown, officials see little reason to rush further rate cuts. Lowering rates typically makes borrowing cheaper for mortgages, car loans, and businesses, though market conditions also play a role.
Inflation Still on Watch
Most policymakers still expect some rate reductions later this year, but many are waiting for inflation to move closer to the Fed’s 2% target. Its preferred inflation measure came in at 2.8% in November, slightly higher than a year ago.
Two Fed governors, Stephen Miran and Christopher Waller, dissented from the decision, preferring a further quarter-point cut. Miran, appointed by former President Trump, had pushed for deeper reductions at previous meetings, while Waller is being considered as a potential successor to Chair Jerome Powell, whose term ends in May.
Political Pressure and Future Challenges
The Fed faces unprecedented political scrutiny from the Trump White House. Powell confirmed that the Fed had received subpoenas from the Justice Department related to a criminal investigation into his testimony on a $2.5 billion building renovation.
The central question remains how long the Fed will maintain its current rate. The rate-setting committee is divided between officials who want to hold until inflation cools further and those who favor cuts to support continued hiring and economic growth.
