After months of cutting interest rates to help the economy, the Federal Reserve hit the pause button on Wednesday, keeping its benchmark rate steady at 3.5% to 3.75% despite heavy pressure from the White House to cut further.
Fed pauses rate cuts at 3.5-3.75% after three consecutive reductions, resisting White House pressure for further monetary easing.
The decision came after the Fed had already lowered rates three times in a row during September, October, and December 2025. Each of those cuts dropped rates by 25 basis points, which is a fancy way of saying a quarter of a percentage point. Think of it like taking small steps down a staircase rather than jumping down all at once. Monetary policy influences borrowing costs and asset prices, which help determine how effective those rate cuts were.
The Fed’s leaders voted 10-2 to keep rates where they are. Two officials, Governors Stephen Miran and Christopher Waller, wanted to cut rates one more time. They were outvoted by their colleagues who thought it was time to wait and see what happens next.
Fed Chairman Jerome Powell explained that rates are now close to neutral, meaning they’re not trying to speed up or slow down the economy too much. He said the current approach helps both create jobs and bring down inflation. During his press conference, Powell suggested rates probably won’t change again anytime soon.
This decision came despite weeks of pressure from President Trump, who publicly called for Powell to lower rates after seeing inflation data. The White House wants looser policies in 2026, but the Fed remained independent in its choice. Global central bank leaders have supported Powell amid recent government scrutiny.
The pause makes sense when you look at what’s happening in the economy. Inflation is still running a bit hot above the Fed’s 2% target, even though job growth has slowed down. It’s like trying to drive a car that wants to go too fast while the engine is cooling down at the same time. The shelter index has continued to cool from its peak in 2023, offering some relief in housing costs. Recent jobs reports showed the economy lost 22,000 jobs per month on average over the last three months, signaling a slowdown in labor market growth.
Wall Street expected this decision, with prediction tools showing 97% odds that rates would stay put. Economists think the Fed might cut rates once more in 2026, possibly in the second half of the year, depending on how things develop.
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