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The Federal Reserve hit the pause button on Wednesday, leaving its key interest rate unchanged at around 3.6% after cutting rates three times last year.
In a statement, the central bank said there were signs of stabilization in the job market and also said growth was “solid”, up from last month’s “moderate” assessment.
With the economy growing at a healthy pace and employment showing no signs of deterioration, Fed officials see little reason to rush for further rate cuts.
Most policymakers expect borrowing costs to fall further this year, but many want to see evidence that persistently high inflation is moving closer to the central bank’s 2% target.
Inflation was 2.8% in November, slightly higher than a year ago, according to the Fed’s recommended metrics.
Two officials opposed the decision, with Gov. Stephen Milan and Christopher Waller wanting an additional quarter-point reduction.
President Donald Trump appointed Milan in September, but he had opposed it in three previous meetings in favor of a 0.5-point cut.
Waller is being considered by the White House to replace Chairman Jerome Powell, whose term ends in May.
The Fed’s decision to keep key interest rates unchanged is likely to spur further criticism from President Trump, who has criticized Powell for months for failing to lower short-term interest rates significantly.
Federal Reserve officials will meet this week in the shadow of unprecedented pressure from President Trump.
Chairman Powell announced on January 11 that the Fed had received a subpoena from the Justice Department as part of a criminal investigation into his testimony to Congress regarding a $2.5 billion building renovation project.
When the Fed lowers its key interest rates, borrowing costs for things like mortgages, auto loans and business loans tend to fall, but those rates are also influenced by market forces.
A key question facing the Fed is how long to keep interest rates unchanged. The rate-setting committee remains divided between officials who oppose further rate cuts until inflation falls and those who want them to further support employment.
Additional sources of information • AP