The Federal Reserve voted Wednesday to hold its interest rate target steady as inflation remains elevated.
After a two-day meeting in Washington, the Fed’s monetary policy committee announced it would hold its rate target at a range of 3.50% to 3.75%. Investors had expected that outcome, but President Donald Trump has pushed hard for more aggressive rate cuts. The central bank has not cut rates in 2026, after implementing cuts at three successive meetings to end 2025.
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Fed governor Stephen Miran, who was appointed by Trump, voted against the decision, preferring a quarter percentage point rate cut.
The Wednesday decision to hold interest rates steady comes as the labor market undergoes a slowdown that some argue should necessitate lower interest rates. Still, the softening of the labor market has not progressed to a point that would force the Fed to cut rates rapidly.
The economy shed 92,000 jobs in February, and the unemployment rate edged up to 4.4%, the Bureau of Labor Statistics said last Friday.
But the Fed weighs not only the labor market, but also inflation when deciding the best course of action for monetary policy. And inflation has remained above the Fed’s 2% long-run target, something that the Fed board sees as necessitating tighter monetary policy.
In the central bank’s preferred gauge, the personal consumption expenditures index, inflation fell one-tenth of a percentage point in January to 2.8%. Inflation has been a bit lower in the more widely watched consumer price index.
While still high, inflation is lower than during the worst of the Biden administration years, when prices rose as much as 7% in one year.
The Fed also released updated multiyear projections for inflation, GDP, and unemployment, as it does every other meeting.
Fed officials said they see inflation, as gauged by the personal consumption expenditures index, running at 2.7% by the end of the year. That is an increase from the board’s last projections in December, when they predicted inflation would fall to 2.4% by the end of 2026.
The officials also projected that the unemployment rate would remain at 4.4% by the end of this year.
In terms of gross domestic product growth, they predict 2.4% GDP growth this year, an increase from December, when board participants were projecting more modest 2.3% growth in 2026.
The latest interest rate decision also comes at a tumultuous time at the Fed, which has faced immense pressure from the White House to slash interest rates.
In January, in an astonishing video statement, Fed Chairman Jerome Powell disclosed a Justice Department investigation into his testimony about cost overruns on a Fed construction project and said that the inquiry was an effort by Trump to sway him to change interest rate policy.
If Powell’s claim is true, it would be an unprecedented intervention by the executive into the traditionally independent workings of the Fed.
Since then, Trump nominated former Fed governor Kevin Warsh to replace Powell, whose term is up in just a few months.
Still, given the investigation, there are questions of whether Warsh can even be seated at the Fed board in the near future.
Retiring Sen. Thom Tillis (R-NC), a member of the Senate Banking, Housing, and Urban Affairs Committee, vowed to block Trump’s nominees to the Fed and whoever he nominates to replace Powell until the legal matter has concluded.
On Wednesday, Tillis indicated to Semafor that he still intends to block Warsh’s nomination.
“There’s only one way out of a box canyon; only one way out,” Tillis said. “And I think that they just need to recognize that all they’re doing is delaying the confirmation of a good nominee. And I told Mr. Wash, when he was sitting in this chair, my position is as important for him as it is for the current Fed chair.”
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It is unclear how many rate cuts, if any, will end up coming in 2026.
If inflation begins to fall back to the Fed’s 2% level and the labor market continues to soften, it could prompt more rate cuts this year, but in some sense the Fed is in wait-and-see mode when it comes to monetary policy.