Despite continuing political pressure from President Donald Trump, the Federal Reserve this week decided against cutting its key interest rate after its first meeting of 2026.
The decision leaves the rate at some 3.6% after lowering it three times last year.
At a news conference announcing the decision, Fed Chair Jerome Powell said the economy’s outlook “has clearly improved since the last meeting” in December, a development that should boost hiring over time. The central bank in a statement said there were signs the job market is stabilizing, The Associated Press reported.
With the economy growing at a healthy pace and the unemployment rate seeming to level off, Fed officials don’t see a need to rush any further rate cuts, according to the AP report. While most policymakers do expect to reduce borrowing costs further this year, many want to see evidence that stubbornly elevated inflation is moving closer to the central bank’s target of 2%. According to the Fed’s preferred measure, inflation was 2.8% in November, slightly higher than a year ago, according to the AP.
Governors Stephen Miran and Christopher Waller dissented, preferring another quarter-point reduction. President Donald Trump appointed Miran in September, and he had dissented at the three previous meetings in favor of a half-point cut.
According to the AP report, a key issue facing the Fed is how long it will remain on hold. The rate-setting committee remains split between those officials opposed to further cuts until inflation comes down, and those who want to lower rates to further support hiring.
In December, just 12 of the 19 participants in the committee’s meetings supported at least one more rate cut this year. Most economists forecast the Fed will cut twice this year, most likely at the June meeting or later.
