Federal Reserve keeps interest rates unchanged even as Trump continues to insist they be lowered

The Federal Reserve maintains current interest rates amid internal divisions, while Trump pressures for cuts to boost hiring.

The Federal Reserve pushed the pause button on its interest rate cuts on Wednesday (January 28, 2026), leaving its key rate unchanged at about 3.6% after lowering it three times last year.

Chair Jerome Powell said at a news conference that 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 stabilising.

With the economy growing at a healthy pace and the unemployment rate appearing to level off, Fed officials likely see little reason to rush any further rate cuts. 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.

Two officials dissented from the decision, with Governors Stephen Miran and Christopher Waller preferring another quarter-point reduction. President Donald Trump appointed Mr. Miran in September, and he had dissented at the three previous meetings in favour of a half-point cut. Mr. Waller is under consideration by the White House to replace Mr. Powell, whose term ends in May.

The Fed’s decision to stand pat will likely fuel further criticism from Mr. Trump, who has relentlessly assailed Mr. Powell for not sharply cutting short-term rates. A reduction in the Fed’s key rate tends to lower borrowing costs for things like mortgages, car loans, and business borrowing, though those rates are also influenced by market forces.

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.