Fed Holds Rates at 3.5% to 3.75%, Pausing After Three Straight Cuts

The Federal Reserve left its benchmark interest rate unchanged on Wednesday at a range of 3.5% to 3.75%, ending a run of three consecutive cuts last year. The decision matched Wall Street expectations, CBS News reported. Ten of the 12 voting members, including Chair Jerome Powell, backed the hold.

Governors Stephen Miran and Christopher Waller dissented, preferring a quarter-point cut. For Miran it was a change of tone: CNBC noted his three earlier dissents had called for half-point reductions.

The Fed’s statement described economic activity as expanding at a “solid pace” and unemployment as still low, and said inflation “remains somewhat elevated,” according to CBS News. Consumer prices rose 2.7% over the year in December, above the Fed’s 2% target, and the economy grew at a 4.4% annual rate in the third quarter, well above forecasts, CBS reported.

At his news conference, Powell cited “a clear improvement on the outlook for growth” and said, “We think we’re well-positioned after those three cuts,” according to CBS. CNBC reported that the statement and Powell’s remarks pointed to solid growth and a tariff-driven bump in inflation that officials expect to fade, with a labor market that has stalled, marked by low hiring and muted layoffs.

Analysts read the message as a signal to wait. Kay Haigh of Goldman Sachs Asset Management expected an extended pause, and Charlie Ripley of Allianz Investment Management said rates are near neutral and it is time for a long pause, CBS reported. CNBC said traders were pricing about a 60% chance of two more quarter-point cuts this year, and stocks closed little changed.

The Justice Department is investigating Powell over his congressional testimony about renovations at Fed buildings, CBS reported, and Powell sidestepped most questions about it. CNBC counted five occasions on which he answered reporters with variations on “I have nothing for you on that,” and asked what advice he would give a successor, he said: “Stay out of elected politics.” CBS reported that he sidestepped most questions on the probe and his successor; his term as chair ends in May.

President Donald Trump has pushed for lower rates and says he will soon name Powell’s replacement, CBS reported. The Supreme Court is also weighing whether Governor Lisa Cook can keep her job after Trump tried to fire her. Powell attended the hearing and called the case “perhaps the most important legal case” in the Fed’s 113-year history, CBS said.