The Federal Reserve Holds Interest Rates Steady
FOMC Holds Interest Rates Steady
Today, and for the first time since July 2025, the Federal Reserve’s FOMC (Federal Open Market Committee) kept interest rates steady between 3.50% and 3.75%. The FOMC voted 10 – 2 in favour of holding rates steady, with the two dissents coming from Governor Waller (a President Trump nominee to replace Fed Chair Powell) and Governor Miran*, both voting for a cut in interest rates of 25 basis points. Post-meeting statements by officials said, “job gains have remained low, and the unemployment rate has shown some signs of stabilisation”. Interestingly, the language that officials used in three previous statements suggested that there were increased downside risks to employment, has disappeared this time around.
Background on Governor Miran
*Federal Reserve Governor Marin – In December 2024, President Donald Trump named Miran as his nominee for chair of the Council of Economic Advisors. He was confirmed by the United States Senate in March 2025. Governor Marin developed the Trump administration’s Tariff Policy, opining that import taxes are not inflationary.
Powell Signals Improving Economic Outlook
After the interest rate announcement, Federal Reserve Chairman Jerome Powell said, “The outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labour demand and for employment over time”. Recently released data backed up this statement, showing steady employment, accelerating growth, and cooling inflation”. On the growth front, official data released last week for GDP showed an annualised growth of 4.4% for Q3 2025, with some experts suggesting it could reach 5.4% in Q4.
Political Pressure and Inflation Concerns
Chairman Powell has also noted, “The economy has once again surprised us with its strength, not for the first time.” However, once again, President Trump has hurled insults at Chairman Powell, calling him a moron for not lowering interest rates. The President’s frustration is likely to grow, as experts say Chairman Powell’s comments clearly suggest the FOMC plans to keep interest rates on hold in the coming months. Indeed, the Federal Reserve’s Personal Consumption Expenditures Inflation Gauge, (their preferred inflation gauge), reflected 2.8% in November 2025 which is nearly a full percentage point above their 2% target, so as some analysts have suggested, this may be another reason to keep rates on hold as the Federal reserve attempt to balance their dual mandate of full employment and price stability.
Market Reaction and What Comes Next
Analysts advise that the reaction by financial markets to the Federal Reserve’s interest rate decision was relatively muted, with traders pricing in two more rate cuts this year, the first cut being expected in June. Indeed, analysts suggest that the statement by officials following the rate decision was on the hawkish side, especially as downside risk to employment was removed from the language and economic activity was reclassified from moderate to solid. This suggests that Chairman Powell may well have presided over his last interest rate cut as he is due to retire on 15th May this year. Global markets are watching with cautious anticipation as President Trump prepares to appoint a rate-cut advocate as the next Chairman of the Federal Reserve. The two dissenters in today’s announcement are Trump appointees, and both Fed Governors are in the frame for selection.
