Federal Reserve keeps interest rates unchanged despite Trump pressure

• The Fed cited 'solid' economic expansion and 'somewhat elevated' inflation as reasons to maintain rates, despite cutting three times in 2025
• Two Fed officials voted for a rate cut, including Christopher Waller who is under consideration to replace Powell as chair
• Powell is under criminal investigation related to congressional testimony about a $2.5bn building renovation, while Trump's pressure on the Fed has prompted Republican senators to voice support for central bank independence

Federal Reserve Holds Rates Steady Amid Trump Pressure

The Federal Reserve voted to maintain its key interest rate at 3.5%-3.75% on January 28, 2026, resisting pressure from President Donald Trump to cut borrowing costs. The central bank cited "solid" economic expansion while noting that inflation remains "somewhat elevated" above its 2% target.

Key Details

The Fed has kept rates unchanged despite three rate cuts in 2025 and ongoing White House demands for easier monetary policy. In its statement, the central bank noted that "job gains have remained low" with unemployment showing "signs of stabilization."

Two Fed officials dissented in favor of a rate cut: Christopher Waller and Stephen Miran, who is on leave from Trump's Council of Economic Advisers. Waller is reportedly under consideration to replace current Fed Chair Jerome Powell, whose term expires in May 2026.

Political Tensions

The decision occurs amid escalating tensions between Trump and Powell. The Fed chair is under criminal investigation related to congressional testimony about a $2.5 billion building renovation. Trump has repeatedly criticized Powell for not reducing rates quickly enough and is expected to announce a replacement soon.

However, economists suggest Trump's pressure campaign may be backfiring. Senate Republicans have voiced support for Powell and threatened to block Trump's nominee, strengthening Fed independence. Patricia Zobel of Guggenheim Investments noted that "the last couple of weeks have been pretty positive for Fed independence."

Market Implications

The Fed's commitment to maintaining rates signals continued prioritization of inflation control over political pressure, potentially supporting dollar stability and tempering growth expectations in interest-rate-sensitive sectors like housing and lending.