The US Federal Reserve has decided to keep interest rates unchanged, while its chair Jerome Powell strongly defended the independence of the central bank.
The Fed voted to hold its benchmark lending rate between 3.5 percent and 3.75 percent. Officials said the US economy continues to grow at a steady pace, giving them confidence to pause further rate cuts for now.
Fed Signals Confidence in Economic Growth
Speaking after the decision, Powell said the economy has once again shown unexpected strength. He noted that overall economic activity remains solid and that recent data supports the Fed’s cautious approach.
The job market shows mixed signals. Hiring has slowed, but unemployment has edged lower. Powell said the balance between inflation and employment has improved compared to earlier meetings.
Inflation remains above the Fed’s long term target of 2 percent. However, easing concerns about job losses played a major role in the decision to hold rates steady.
Political Pressure and Legal Scrutiny
US President Donald Trump has repeatedly criticized Powell for not cutting interest rates faster. Trump argues that lower rates would reduce government borrowing costs and make loans cheaper for Americans.
Federal prosecutors recently opened a criminal investigation related to Powell’s testimony to the Senate about renovations to Federal Reserve buildings. Powell declined to comment on the probe but warned that political interference could damage trust in the institution.
Powell said central bank independence protects monetary policy from political influence. He stressed that losing this independence would harm the credibility of the Fed and would be difficult to rebuild.
Supreme Court Case Raises Wider Concerns
Trump has also targeted Fed governor Lisa Cook, accusing her of mortgage fraud. Cook has denied the allegations. The case is now under review by the Supreme Court.
Justices from both sides of the court expressed concern about the impact such actions could have on the Fed’s independence and the broader economy.
Powell attended the hearing and described it as one of the most important legal cases in the Fed’s history.
Divided Votes but Clear Direction
Two officials voted in favor of cutting rates. They were Stephen Miran and Christopher Waller. Despite this, most policymakers agreed that recent economic strength justified keeping rates unchanged.
Markets reacted cautiously. The S and P 500 briefly crossed 7,000 points before closing flat.
Analysts say rate cuts may still happen later this year. However, the Fed wants more clarity on inflation before acting.
Uncertainty Over Future Leadership
Powell’s term as Fed chair ends in May. Trump is expected to name a successor soon. Whoever takes the role will face questions about independence due to ongoing political pressure on the central bank.
Former Fed leaders have warned that undermining autonomy could weaken confidence in US monetary policy.
