U.S. Federal Reserve holds interest rates as pressure from Trump mounts

The Federal Reserve pushed the pause button on its interest rate cuts Wednesday, leaving its key rate unchanged at about 3.6 per cent after lowering it three times last year.

The U.S. Federal Reserve pushed the pause button on its interest rate cuts Wednesday, leaving its key rate unchanged at about 3.6 per cent after lowering it three times last year.

The central bank said in a statement that there are signs the job market has stabilized while it also said growth was “solid,” an upgrade from last month’s characterization as “modest.”

With the economy growing at a healthy pace and no signs of deterioration in hiring, 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 two per cent. According to the Fed’s preferred measure, inflation was 2.8 per cent 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. U.S. President Donald Trump appointed Miran in September, while Waller is under consideration by the White House to replace Chair Jerome Powell, whose term ends in May.

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

The central bank’s rate reductions last year were intended to shore up the economy and prevent a sharper deterioration in the job market, after hiring slowed to a near-crawl in the wake of Trump’s sweeping tariffs last April. Yet there are signs that unemployment has stabilized and the economy could be picking up. At the same time, inflation remains stubbornly above the Fed’s two per cent target.

All those trends argue for keeping rates where they are.