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The US Federal Reserve has decided to maintain current interest rates, as Chairman Jerome Powell underscored the significance of central bank autonomy.
The Fed announced it would hold its benchmark lending rate steady, within a range of 3.5% to 3.75%, citing that the US economy “has been expanding at a solid pace.”
Former US President Donald Trump had frequently criticized Powell for what he perceived as insufficient rate cuts. Federal prosecutors recently initiated a criminal investigation into testimony Powell provided to the Senate concerning renovations to Federal Reserve buildings.
On Wednesday, Powell refrained from commenting on the ongoing investigation. However, he asserted that the loss of central bank independence “would make it hard to restore the credibility of the institution.”
Powell previously suggested that the federal investigation stemmed from Trump’s dissatisfaction with the pace of interest rate reductions.
At his first press conference since the condemnation of the Department of Justice (DoJ) probe, he emphasized the critical role of central bank independence in ensuring that monetary policy remains free from political influence.
“It’s an institutional arrangement that has served the people well – to not have direct elected official control over the setting of monetary policy,” he stated.
Powell cautioned, “If you lose that, it first of all would be hard to restore the credibility of the institution,” while affirming his “strongly committed” stance on maintaining the Fed’s independence.
Trump is expected to announce a replacement for Powell, whose term as chair concludes in May.
Former leaders of the US central bank have also voiced strong criticism of the DoJ investigation, characterizing it as an attempt to undermine the Fed’s autonomy.
Addressing the decision to maintain interest rates, Powell remarked, “The economy has once again surprised us with its strength.”
There are indications that the employment market is stabilizing, with modest job creation and a slight decrease in the unemployment rate. Policymakers are closely monitoring the economic effects of the three interest rate cuts implemented last year.
Powell noted, “We still have some tension between employment and inflation, but it’s less than it was.”
“The outlook for economic activity has clearly improved since the last meeting,” he added.
Concerns regarding a slowing job market outweighed inflation fears in the latter half of 2025. Lowering interest rates is intended to stimulate the job market by reducing borrowing costs for businesses.
Anxieties about a deteriorating jobs market have subsided in recent weeks, but inflation remains above the Fed’s 2% target.
The S&P 500 stock index experienced fluctuations leading up to Powell’s remarks, briefly exceeding 7,000 points for the first time, before ultimately closing with minimal change.
Two Fed officials dissented, advocating for an interest rate cut: Stephen Miran, currently on leave from his position at the White House as head of Trump’s Council of Economic Advisers, and Christopher Waller, a Trump appointee whose name has been mentioned as a potential successor to Powell.
Despite these dissenting voices, the Fed board highlighted recent improvements in economic data, which reinforced policymakers’ confidence in maintaining stable rates.
“The Fed song remains the same,” observed Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “Lower interest rates may be coming but investors will have to remain patient.”
“While the Fed’s pause may not satisfy everyone, it still leaves a path for cuts later this year,” she concluded.
Trump had publicly urged Powell to reduce interest rates, with the aim of lowering the US government’s substantial borrowing expenses and facilitating easier access to mortgages and other loans for Americans.
He had also launched personal attacks against Powell, whom he appointed as Fed chair during his initial term in the White House, referring to the central banker as a “major loser” and “numbskull.”
The former president has also targeted Fed governor Lisa Cook, seeking her removal and accusing her of mortgage fraud, which she denies. The Supreme Court is currently deliberating on the case.
Justices from both the left and right expressed concerns about the implications for central bank independence and the broader economy last week.
Powell attended the Supreme Court hearing and on Wednesday described it as “perhaps the most important legal case in the Fed’s 113-year history.”
Another uncertainty looming over the bank is Trump’s choice to succeed Powell at the end of his term.
Whoever assumes the role will inevitably confront questions about credibility, as Trump’s pressure on the Fed has raised doubts regarding the independence of the next chair.
BlackRock executive Rick Rieder has recently emerged as a leading candidate.
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