The U.S. Federal Reserve Holds Interest Rates Steady in Its First Meeting of 2026

SadaNews - On Wednesday, the U.S. Federal Reserve (the central bank) kept the interest rate unchanged, in line with expectations, as the Federal Open Market Committee maintained the overnight lending rate in a range of 3.5% to 3.75%.

Markets had expected the "Fed" to ignore repeated calls from President Donald Trump to lower interest rates following three consecutive cuts of a quarter-point each in 2025.

The goal of the interest rate cuts initiated by the central bank last year was to support the economy and prevent a severe deterioration in the labor market, following a noticeable slowdown in hiring after the sweeping tariffs imposed by President Donald Trump on nearly all U.S. imports last April.

However, there are signs of stabilization in the unemployment rate and potential economic recovery. At the same time, inflation remains significantly above the Federal Reserve’s target of 2%.

One of the main issues that Federal Reserve Chairman Jerome Powell is likely to address in his upcoming press conference is how long the board will maintain its current monetary policy.

The rate-setting committee remains divided between officials who oppose further cuts until inflation decreases, and others who want to lower interest rates to further support employment. In last December’s meetings, only 12 out of 19 committee members supported at least one interest rate cut this year.

Most economic experts expect the board to reduce interest rates twice this year, likely at the upcoming June meeting or thereafter.

This week’s meeting of Federal Reserve officials comes amid unprecedented pressure from the Trump administration.

Powell stated on January 11 that the board received subpoenas from the Justice Department as part of a criminal investigation regarding his testimony before Congress about a $2.5 billion renovation project for a building affiliated with the board.

In an unusually candid video statement, Powell said the subpoenas were a pretext to punish the Federal Reserve for not lowering interest rates at a faster pace.

Last week, the Supreme Court heard Trump's attempt last year to remove Lisa Cook, a Federal Reserve Governor, amid allegations of real estate fraud, which she denies. No president has ever removed a governor in the Fed's 112-year history. It appeared that the judges, during the oral arguments, leaned towards allowing her to remain in her position until the case is resolved.

At the same time, Trump hinted that he is close to appointing a new Fed chairman to replace Powell when his term ends in May. The announcement could come as early as this week, although it has been postponed previously.

Economists say that the president's efforts to pressure the Federal Reserve may have backfired, as Senate Republicans expressed their support for Powell and threatened to block Trump's nominee to succeed Powell.