The Fed on Wednesday kept interest rates in the current range, a move that was widely expected in spite of intensifying pressure from President Trump and the criminal probe into Fed Chair Jerome Powell.
After three consecutive quarter-point cuts in 2025, the central bank maintained rates in the 3.5% to 3.75% range at its first meeting of the year – though Stephen Miran and Christopher Waller called for a quarter-point cut in the 10-2 vote on holding rates steady.
Policymakers opted to take a wait-and-see approach, though they delivered an upbeat outlook on the economy – saying activity has been expanding at a “solid pace” and unemployment rate has shown “some signs of stabilization.”
“The economy has once again surprised us with its strength, not for the first time,” Powell said during a press conference Wednesday.
However, he said the Fed is not ruling out any future moves and would cut rates if the labor market weakens – and, though unlikely, hike rates if inflation heats up.
“I’d characterize today’s meeting as a very boring meeting during very interesting times,” Christian Hoffmann, head of fixed income at Thornburg Investment Management, said in a note Wednesday.
“Any day now, I expect we’ll learn who Powell’s successor will be, and I wouldn’t be surprised if an announcement is timed to the current meeting … Trump, paradoxically, wants a new chair who is sympathetic to his views and also credible to investors,” Hoffmann wrote.
BlackRock exec Rick Rieder and former Fed Governor Kevin Warsh are currently seen as the president’s front-runners to replace Powell on prediction markets.
Powell also discussed his decision to attend the Supreme Court hearing on whether Trump can fire Fed Governor Lisa Cook over alleged mortgage fraud, calling it the “most important legal case in the Fed’s 113-year-history.”
“It might be hard to explain why I didn’t attend,” he added.
Treasury Secretary Scott Bessent previously criticized Powell for his plans to go to the hearing.
As part of the Fed’s annual January rotation, it has added four new members to its 12-person voting committee.
Three of those new members have expressed opposition to some of last year’s interest rate cuts, advocating for a more cautious approach.
Meanwhile, Trump’s attacks on Powell — whose term as chairman expires in May — have heated up as the president has continued to call for a more aggressive rate-cutting path.
Earlier this month, Powell revealed that he’s under criminal investigation for allegedly lying during congressional testimony last summer over the Fed’s $2.5 billion headquarters renovation in DC.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said in a stunning video statement.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
Trump nominated Powell to lead the Fed at the start of his first presidential term, but he has since threatened to fire the chairman several times — calling him “stupid” and claiming he has “mental problems.”
