The U.S. Federal Reserve (Federal Reserve, Fed) kept interest rates unchanged, as expected, within the range of the federal funds rate at 3.50% – 3.75%, in a decision that confirms the central bank’s wait and see stance amid heightened uncertainty about the trajectory of the economy. The decision follows three consecutive interest rate cuts. Available indicators show that economic activity in the United States continues to expand at a steady pace, however employment growth remains subdued, while unemployment shows signs of stabilization. At the same time, inflation continues to run above target, remaining “persistently high” and above the target, as the Fed itself effectively acknowledges. The Federal Open Market Committee (FOMC) reiterates that “its primary objective remains the achievement of maximum employment and the return of inflation to 2% over time (on an annual basis),” emphasizing that uncertainty about the economic outlook remains elevated and that risks are two sided.
Powell gives no clear signal on monetary policy, no comment on the dollar’s plunge
The U.S. Federal Reserve remains in a wait and see mode, with its President, Jerome Powell, avoiding providing a clear signal on the course of monetary policy during the current year. As he clarified in statements following the conclusion of the two day Fed meeting, monetary policy is not on a predetermined path and decisions will continue to be made meeting by meeting, based on prevailing economic data. Mr. Powell revealed that there is “broad support” within the Federal Open Market Committee (FOMC) for maintaining interest rates at current levels, including among members who do not have voting rights. The current policy stance, as he noted, is considered appropriate and allows the Fed to continue making progress toward its two primary objectives, price stability and maximum employment.
According to the Fed President, economic activity in the United States shows clear improvement compared to the previous meeting. The U.S. economy grew at a robust pace in 2025 and is entering 2026 “on a solid footing.” Recent economic data, he said, show a clear upgrade in growth prospects, while previous distortions in the data are no longer considered material.
Particular emphasis was placed on the labor market, where, as J. Powell noted, the picture is mixed. On the one hand, there are indications of unemployment stabilization, on the other hand the slowdown in the creation of new jobs continues. This development is attributed mainly to a decline in the labor force, although demand for labor has clearly weakened. Nevertheless, the Fed does not currently detect an abrupt deterioration in employment conditions.
Mr. Powell acknowledged that inflation remains above the 2% target, while emphasizing that the disinflationary trend continues primarily in the services sector. By contrast, inflation in goods remains elevated, a development attributed to the effects of tariffs. The Fed President estimated that tariffs are likely to cause a one time increase in prices, with their effects peaking and then easing within the year. If this is confirmed, it could create the conditions for a loosening of monetary policy.
Despite volatility recorded in the foreign exchange market and the recent decline of the dollar, he avoided any related comment. As he stated, the Fed does not comment on movements of the U.S. currency, as responsibility for exchange rate policy lies with the government and the U.S. Department of the Treasury.
Pressure from Washington
At the same time, political pressure is intensifying behind the scenes, with Donald Trump returning publicly and calling for aggressive interest rate cuts, accusing the Fed of maintaining an excessively restrictive stance that, according to him, harms growth and the competitiveness of the U.S. economy. Despite the pressure, the Fed appears determined to act based on data rather than the political climate, signaling that it remains ready to adjust its stance should risks emerge that could derail its objectives.
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