Fed holds interest rates steady, pausing rate cuts amid economic uncertainty

• The FOMC voted 10-2 to hold rates unchanged, with dissents from Fed Governors Stephen Miran and Christopher Waller who both favored a 25 basis point cut
• The pause follows three consecutive 25 basis point rate cuts in September, October, and December 2024 that brought rates down from higher levels
• The Fed's statement acknowledged the economy is 'expanding at a solid pace' but noted inflation remains 'somewhat elevated' above the 2% target while job gains have been low

Summary

The Federal Reserve held interest rates steady on Wednesday, maintaining the benchmark federal funds rate at 3.5%-3.75%, pausing after three consecutive rate cuts totaling 75 basis points in September, November, and December 2024.

Key Decision Details:

• The Federal Open Market Committee (FOMC) voted 10-2 to keep rates unchanged
• Dissenting votes came from Fed Governors Stephen Miran and Christopher Waller, who favored a 25 basis point cut
• This marks the first pause in rate cuts since the easing cycle began

Economic Rationale:

The decision reflects ongoing economic uncertainty, with the FOMC citing:

• Economy "expanding at a solid pace"
• Job gains "remained low" with unemployment showing "some signs of stabilization"
• Inflation "remains somewhat elevated" above the Fed's 2% target

Notable Context:

• Governor Miran has consistently favored deeper cuts since joining the board; his term expires Saturday
• Governor Waller, viewed as a potential Fed chair nominee, last dissented in July when rates were held steady
• Fed Chair Jerome Powell previously indicated interest rates are approaching neutral levels, positioning the central bank to respond to economic shifts

Market Implications:

The pause signals the Fed's cautious approach amid mixed economic data, balancing persistent inflation concerns against labor market softness. Powell's press conference at 2:30 p.m. ET was expected to provide additional guidance on future policy direction.