The central bank said in a statement that there are signs the job market has stabilized while it also said growth was “solid,” an upgrade from last month’s characterization as “modest.”
With the economy growing at a healthy pace and no signs of deterioration in hiring, Fed officials likely see little reason to rush any further rate cuts. While most policymakers do expect to reduce borrowing costs further this year, many want to see evidence that stubbornly-elevated inflation is moving closer to the central bank’s target of 2%. According to the Fed’s preferred measure, inflation was 2.8% in November, slightly higher than a year ago.
Two officials dissented from the decision, with Governors Stephen Miran and Christopher Waller preferring another quarter-point reduction. President Donald Trump appointed Miran in September, and he had dissented at the three previous meetings in favor of a half-point cut. Waller is under consideration by the White House to replace Chair Jerome Powell, whose term ends in May.
The Fed’s decision to stand pat will likely fuel further criticism from Trump, who has assailed Powell for months for not sharply cutting short-term rates. When the Fed reduces its key rate, it tends to lower borrowing costs for things like mortgages, car loans, and business borrowing, though those rates are also influenced by market forces.
A key issue facing the Fed is how long it will remain on hold. The rate-setting committee remains split between those officials opposed to further cuts until inflation comes down, and those who want to lower rates to further support hiring.
In December, just 12 of the 19 participants in the committee's meetings sjupported at least one more rate cut this year. Most economists forecast the Fed will cut twice this year, most likely at the June meeting or later.
