The Federal Reserve kept interest rates unchanged on Wednesday, holding its benchmark range at 3.50 to 3.75 per cent at the first policy meeting of the year. Policymakers pointed to steady economic growth as they resisted renewed pressure from Donald Trump to cut borrowing costs.
The rate decision, approved by a 10–2 vote, matched market expectations. Officials said they needed more economic data before making further adjustments. In its statement, the Fed noted that economic activity continues to expand at a solid pace, while the labour market shows early signs of stabilisation.
Two policymakers voted against the decision. Fed governors Stephen Miran and Christopher J. Waller supported a quarter-point rate cut, citing risks from labour market softness. Waller is widely viewed as a potential successor to Fed Chair Jerome Powell, whose term ends in May.
The Fed has already delivered three quarter-point cuts over recent meetings. However, steady GDP growth, resilient employment data and persistent inflation have strengthened the case for a pause, putting the central bank at odds with the White House.
Federal Reserve officials left interest rates unchanged and pointed to improvements in the US economy as they signaled a more cautious approach to potential future adjustments https://t.co/ErxoI5gkVL pic.twitter.com/d4f5gjejTB
— Bloomberg TV (@BloombergTV) January 28, 2026Trump Pressure and Fed Independence
Since returning to the office, Trump has sharply criticised the Fed and intensified pressure on its leadership. His administration has sought to remove Fed Governor Lisa Cook and launched an investigation into the Fed’s headquarters renovation, developments that have raised concerns about political interference.
Powell said on Wednesday that he remains confident in the Fed’s independence, though he has previously warned that legal challenges facing the institution could have historic consequences. He has described one such case as potentially the most important legal test in the Fed’s 113-year history.
Powell also criticised attempts to threaten criminal action against Fed officials, stressing that monetary policy must remain free from political pressure.
JUST IN: ⚡ The US Federal Reserve has announced it will keep interest rates unchanged, in line with expectations, following three consecutive rate cuts in September, October and December. pic.twitter.com/mjQoq2ZZhS
— CoinMarketCap (@CoinMarketCap) January 28, 2026Outlook for Interest Rates
Economists say the Fed now faces a policy stalemate. Heather Long, chief economist at Navy Federal Credit Union, said neither inflation-focused nor labour-market-focused policymakers currently command strong backing for a shift in rates.
Powell said the Fed will continue to let incoming data guide future decisions. A sharper slowdown in employment or clearer signs of easing inflation could reopen the door to rate cuts. He added that tariff-driven inflation may peak later in the year but warned against declaring victory too soon.
Markets largely expect the Fed to keep rates unchanged until at least June, according to CME FedWatch.
Looking ahead, analysts are closely watching how Powell’s successor may reshape policy. When asked what advice he would give the next chair, Powell offered a simple message: avoid being drawn into politics and protect the Fed’s independence.
