Federal Reserve Keeps Interest Rates on Hold

The US Federal Reserve has left interest rates unchanged for the first time since July, with chair Jay Powell signalling that policymakers are in no hurry to cut borrowing costs despite sustained pressure from President Donald Trump.

On Wednesday, the Fed kept its benchmark rate in a range of 3.5 to 3.75 per cent, following three consecutive quarter-point cuts. The decision was fully in line with market expectations.

Speaking after the meeting, Powell said that with economic growth remaining strong and the labour market showing signs of stabilisation, current rates could not be described as “significantly restrictive”. He noted that the US economy had once again exceeded expectations, while inflation developments were broadly in line with forecasts and employment data pointed to emerging stability.

Official figures released last week showed annualised GDP growth of 4.4 per cent in the third quarter of 2025, with the Atlanta Fed suggesting growth could accelerate to as much as 5.4 per cent in the final quarter of the year.

Powell’s remarks were among the clearest indications so far that the Fed intends to keep rates on hold in the coming months, despite Trump’s repeated calls for aggressive easing. The president has publicly criticised Powell for refusing to cut rates more quickly.

Financial markets reacted cautiously. Investors continue to price in the next rate cut no earlier than the summer. The US dollar edged higher, two-year Treasury yields rose modestly within recent ranges, and the S&P 500 remained broadly flat.

Powell said there was broad support within the policy-setting committee for maintaining current rates. However, governor Christopher Waller and fellow governor Stephen Miran dissented, both arguing for a quarter-point reduction.

The Fed remains caught between its dual mandate of price stability and maximum employment. Its preferred inflation gauge, the personal consumption expenditures index, stood at 2.8 per cent in November, above the 2 per cent target. At the same time, labour market indicators have softened, with job creation slowing sharply and long-term unemployment reaching a four-year high.

Powell also underscored the importance of the Fed’s independence amid a Justice Department investigation into a costly renovation of its headquarters. He defended the institution’s autonomy and described ongoing legal challenges involving the Fed’s leadership as among the most consequential in its history.