US Federal Reserve Pauses Rate Cuts, Holds Interest Rates Steady as Inflation Remains Elevated

New Delhi, January 29: The US Federal Reserve on Wednesday voted to keep interest rates unchanged, pausing its rate cut cycle after three consecutive reductions late last year. In a widely expected decision, the central bank maintained its benchmark interest rate in the range of 3.50 percent to 3.75 percent, reflecting confidence in economic stability while acknowledging that inflation remains above target.

The move signals a shift to a more cautious wait and see approach as policymakers evaluate the impact of earlier rate cuts on growth, inflation and the labor market. Speaking after the two day Federal Open Market Committee meeting, Federal Reserve Chair Jerome Powell said the US economy is on firm footing, though progress toward the central bank’s 2 percent inflation goal continues to face challenges. Next Fed Chair: US President Donald Trump Says He Has Made His Choice To Lead the Federal Reserve and Will Announce It ‘Soon’.

Fed Decision Not Unanimous

The rate decision was approved by a 10 to 2 vote, marking a rare split within the policy setting committee. Governors Christopher Waller and Stephen Miran dissented, calling for an immediate quarter percentage point rate cut to provide additional support to the labor market. Stocks Fall on Wall Street After Federal Reserve Chair Jerome Powell Says ‘Donald Trump Trying to Undermine the Fed’s Independence’.

Most policymakers, however, indicated that the urgency to reduce borrowing costs has eased. The policy statement noted that job gains have remained modest but steady, while the unemployment rate appears to be stabilizing. At the same time, inflation remains somewhat elevated, with core inflation estimated at around 3 percent in December.

Powell attributed part of the recent inflation pressure to higher goods prices linked to tariffs, which he described as a temporary factor rather than a sign of persistent inflation.

Economy Shows Resilience

During his press conference, Powell struck a cautiously optimistic tone, highlighting solid economic growth and improving overall conditions since the Fed’s last meeting in December. He said economic activity continues to expand at a healthy pace, giving policymakers room to be patient.

Addressing concerns about rising prices, Powell said the central bank expects tariff related increases to pass through the economy as one time effects. He added that the Fed is prepared to look past short term price spikes as long as long term inflation expectations remain well anchored.

Fed Independence in Focus

The meeting came amid heightened political scrutiny of the Federal Reserve. President Donald Trump has repeatedly criticized the central bank for not cutting interest rates more aggressively. In addition, the Justice Department recently issued a subpoena related to Powell’s past testimony on Federal Reserve building renovations, a move Powell has publicly described as a pretext for political pressure.

When asked about the Fed’s independence, Powell stressed the importance of public trust in the institution. He warned that confidence in the central bank could be difficult to restore if people believe policy decisions are influenced by politics rather than economic data.

Powell also offered advice for his eventual successor, urging future leaders to avoid involvement in elected politics and remain focused solely on the Fed’s mandate.

What Comes Next for Interest Rates

The Federal Reserve did not provide a clear timeline for future rate cuts, reiterating that all decisions will be made meeting by meeting based on incoming economic data.

Market analysts see the pause as a sign that the threshold for further easing has increased. While investors had previously expected another rate cut as early as March, expectations have now shifted toward June as the earliest possible window.

For now, the central bank appears comfortable holding rates steady as it balances the risk of reigniting inflation against the need to support continued economic growth and a stable labor market.

(The above story first appeared on LatestLY on Jan 29, 2026 08:19 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).