Federal Reserve Pauses Rate Cuts, Holds Benchmark Rate at 3.5%–3.75%

The Federal Reserve on Wednesday halted its recent cycle of interest rate cuts, opting to keep its benchmark rate within a 3.5% to 3.75% range, as the central bank navigates questions over its independence and awaits the appointment of new leadership.

The decision brings an end to three consecutive quarter-point rate cuts, which officials had previously described as precautionary moves aimed at shielding the labor market from a potential slowdown.

In its policy statement, the Federal Open Market Committee (FOMC) upgraded its assessment of economic growth and expressed less concern about labor market weakness relative to inflation, according to CNBC.

The Fed said recent indicators suggest that economic activity continues to expand at a strong pace, while job gains remain subdued. The unemployment rate has shown signs of stabilization, but inflation remains relatively elevated, still above the central bank’s 2% target.

Notably, policymakers removed language from the statement indicating that risks to the labor market outweighed inflation risks, signaling a more cautious and balanced stance as the Fed seeks to achieve both price stability and maximum employment.

Markets now expect no further rate adjustments before June, reflecting confidence that policymakers will remain patient in the coming months.

“The Committee will carefully assess incoming data, the evolving outlook, and the balance of risks when considering the extent and timing of any additional policy adjustments,” the Fed said.

The decision was not unanimous. Two FOMC members, Stephen Miran and Christopher Waller, dissented, favoring an additional rate cut at this meeting.

Their opposition underscores ongoing debate within the central bank over how aggressively policymakers should move to support economic momentum as inflation gradually eases.

The rate decision comes at a sensitive moment for the Fed, as Chair Jerome Powell approaches the end of his eight-year term, a period marked by a global pandemic, a sharp recession, and heightened political pressures.