US Fed Holds Interest Rates, Defies Trump Tantrums

Central Bank

Summary:

The US Federal Reserve on Wednesday decided to keep its base rates unchanged, as the US economy continues to remain stable and unemployment remains low, defying President Donald Trump's calls for more cuts.

In a statement, the Federal Open Markets Committee said that the Board has decided to maintain its target range for the federal funds rate between 3.50 per cent and 3.75 per cent.

The central bank has lowered rates in each of its last three policy meetings as officials fretted about the cooling jobs market.

Source: khaleejtimes

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Manuel

Forex

Central Bank

The U.S. Federal Reserve held interest rates steady on Wednesday, citing still-elevated inflation alongside solid economic growth, and giving little indication in its latest policy statement of when ‌borrowing costs might fall again.

"Economic activity has been expanding at a solid pace," Fed policymakers said in the statement after voting 10-2 to hold the U.S. central bank's benchmark interest rate in the 3.50%-3.75% range following a two-day meeting.

Both Governor Christopher Waller, a contender to replace Fed Chair Jerome Powell when his term as central bank chief ends in May, and Governor Stephen Miran, on leave from his job as ‌an economic adviser at the White House, dissented in favor of a quarter-percentage-point rate cut.

The Fed's statement offered no hint about when another reduction in borrowing costs might come, noting that "the extent and timing of additional adjustments" to the policy rate would depend on incoming data and the economic outlook.

Meanwhile, inflation "remains somewhat elevated," the central bank said, while the ‍job market has "shown some signs of stabilization."

Though the Fed noted that "job gains have remained low," it also removed language from its prior statement saying that downside risks to employment had risen - an indication policymakers as a group are becoming less worried about a rapid downturn in the labor market.

Fed policymakers ahead ⁠of this week's meeting had largely characterized the job market as roughly in balance, with smaller gains matching the slower growth in the ‍numbers of those seeking employment as a result of the Trump administration's stricter immigration policies. The unemployment rate in December fell to 4.4%.

Powell is scheduled ‌to ‌hold a press conference at 2:30 p.m. EST (1930 GMT) to discuss the policy statement and economic outlook.

FED REMAINS DIVIDED

The decision to maintain borrowing costs at their current level puts the Fed's current monetary easing cycle, begun near the end of the Biden administration and continued after a pause of roughly nine months during President Donald Trump's second term in the White House, on hold again after three ⁠quarter-percentage-point reductions at the central ⁠bank's final three meetings of 2025.

The rate cut at the December 9-10 meeting left the policy-setting Federal Open Market Committee unusually divided. Three of its 12 voting members dissented, with one in favor of an even deeper cut and two in favor of no reduction at all.

Those same divisions have carried into 2026, and recent ‍economic data have done little to change the outlook for those officials most concerned that inflation is not progressing back to the central bank's 2% target, or for those more worried about a rise in the unemployment rate if credit conditions aren't loosened to encourage more spending and investment.

It's a debate that could shape the first weeks in office of whoever is named to ‍replace Powell in the top Fed job, a decision that Trump is expected to announce soon. Powell's successor is expected to be in place to run the central bank's June 16-17 policy meeting. Investors currently expect the Fed to keep rates on hold until then.

Source: Reuters

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Liam Peterson

Central Bank

Remarks of Officials

Economic

Political

Data Interpretation

The U.S. Federal Reserve held interest rates steady on Wednesday, keeping its benchmark policy rate in the 3.50%-3.75% range while offering little guidance on when the next cut might occur.

In its latest policy statement, the central bank pointed to a combination of solid economic expansion and persistent inflation as key factors behind the decision. The move signals a pause in the monetary easing cycle that began under the Biden administration and continued into President Donald Trump's second term.

Fed Chair Jerome Powell is expected to provide further details on the economic outlook in a press conference scheduled for 2:30 p.m. EST.

A Divided Vote on Policy Direction

The decision was not unanimous. The Federal Open Market Committee (FOMC) voted 10-2 to maintain the current rate, highlighting a growing split among policymakers.

The two dissenting votes came from:

• Governor Christopher Waller: A contender to replace Jerome Powell as Fed Chair.

• Governor Stephen Miran: An economic adviser at the White House currently on leave.

Both Waller and Miran advocated for a quarter-percentage-point rate cut, signaling a desire to lower borrowing costs sooner rather than later.

The official statement offered no clear timeline for future policy changes, noting that "the extent and timing of additional adjustments" will depend entirely on incoming economic data. Policymakers explicitly stated that inflation "remains somewhat elevated."

Shifting Outlook on the Labor Market

While the Fed acknowledged that "job gains have remained low," it also made a notable change to its statement. The central bank removed previous language indicating that "downside risks to employment had risen."

This subtle shift suggests that policymakers are becoming less concerned about a potential sharp downturn in the U.S. labor market. Officials have increasingly described the job market as being in a state of balance, with slower hiring aligning with reduced growth in the number of job seekers, partly influenced by the Trump administration's immigration policies.

The unemployment rate stood at 4.4% in December.

Internal Disagreement Persists as Leadership Transition Nears

The current pause follows three consecutive quarter-percentage-point rate cuts at the end of 2025. The final cut of that year, made at the December 9-10 meeting, revealed an unusually divided committee, with three of twelve members dissenting.

These internal divisions have carried over into 2026. Recent economic data has done little to bridge the gap between officials worried that inflation is not returning to the 2% target and those more concerned about rising unemployment if credit conditions remain tight.

This ongoing debate is set to define the early days of the next Fed Chair. President Trump is expected to announce a successor to Jerome Powell, whose term ends in May, in the near future. The new chair is anticipated to be in place for the central bank's June 16-17 policy meeting. For now, investors are betting that the Fed will keep rates on hold until at least that meeting.

To stay updated on all economic events of today, please check out our Economic calendar

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Isaac Bennett

Remarks of Officials

Political

The United States, Denmark, and Greenland have initiated a formal process to resolve the ongoing standoff over the semi-autonomous territory, U.S. Secretary of State Marco Rubio announced on Wednesday.

Speaking to the Senate Foreign Relations Committee, Rubio confirmed that representatives from all three parties are now engaged in technical-level meetings. He expressed optimism about the negotiations, stating, "We're in a good place right now," and anticipates the process will lead to a "good outcome for everybody."

U.S. Secretary of State Marco Rubio addresses the Senate Foreign Relations Committee regarding policy on Greenland.

Negotiations Structured for Privacy and Progress

While details about the participants and location were not disclosed, Rubio explained that the talks are intentionally structured to avoid a "media circus" around each meeting. This approach is designed to provide greater flexibility as the parties work toward a solution.

"I think we're going to get there," Rubio told the committee during the public session.

A Shift from Trump's Earlier Stance

The diplomatic effort marks a significant shift from President Donald Trump's aggressive push earlier in the year for the U.S. to acquire Greenland from Denmark. That move raised the unusual prospect of the United States confronting a NATO ally over territory.

Rubio described as "important" President Trump's recent statement at the World Economic Forum in Davos, where he declared he was no longer pursuing a military solution to the crisis. In Davos, Trump also mentioned that a "framework of a future deal with respect to Greenland" had been reached, though the specifics of that framework have not been made public.

Denmark Acknowledges Talks Amid Disagreement

Danish officials have also confirmed the establishment of a dialogue. Last week, Danish Foreign Minister Lars Løkke Rasmussen announced that a "high-level working group" was being formed between the U.S., Denmark, and Greenland.

However, Rasmussen also cautioned that "fundamental disagreement" with Washington persists, signaling that the path to a final resolution may be complex.

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Henry Thompson

Central Bank

Remarks of Officials

Political

Economic

Treasury Secretary Scott Bessent confirmed Wednesday that President Donald Trump is still considering four "great" candidates to succeed Jerome Powell as the next Chairman of the Federal Reserve.

The confirmation followed an extended discussion on the matter between Bessent and Trump during a flight from Iowa back to Washington.

The Selection Process Nears its Conclusion

Speaking to CNBC, Bessent described a detailed, two-hour conversation with the president about the central bank's leadership. He clarified his advisory role, stating, "I don't make recommendations. I give the president options and outcomes. It's going to be the president's decision."

The timeline for an official announcement remains unclear. When asked about the timing, Bessent noted, "Only the president knows." The White House did not provide an immediate comment on when a decision might be made.

This follows earlier remarks from Trump, who said he was "down to one in my mind," suggesting a decision was imminent.

Who Are the Top Contenders for Fed Chair?

While Bessent did not name the four individuals, several candidates have been identified in recent weeks. According to the prediction market Kalshi, Rick Rieder, BlackRock’s chief bond investment manager, is the clear favorite to succeed Powell when his term ends in May. Trump previously described Rieder's interview as "very impressive."

Other potential nominees mentioned by Trump and his aides include:

• Christopher Waller, a current Fed Governor.

• Kevin Warsh, a former Fed Governor.

• Kevin Hassett, Trump's top economic adviser, although the president has also expressed a desire to keep him in his current role.

Bessent Weighs In on Inflation and Interest Rates

Beyond the nomination process, Bessent offered his perspective on monetary policy, urging the Federal Reserve to maintain an "open mind" regarding interest rates. He suggested that many on the board hold "a false narrative" about inflation.

"I hope that they will have an open mind and see what's coming over the next couple months," he said.

Bessent argued that strong U.S. economic growth and rising wages do not automatically guarantee higher inflation, especially given counteracting forces like substantial decreases in rents.

Interim Board Stability

Bessent also noted that Stephen Miran could continue serving on the Fed's Board of Governors for now. Miran, who is on leave from his position as chairman of the White House Council of Economic Advisers, joined the board in September to complete the 14-year term of Adriana Kugler, who resigned.

Miran has indicated he will likely remain on the board until the Senate confirms Trump's nominee for the next Fed chair, providing stability during the transition.

To stay updated on all economic events of today, please check out our Economic calendar

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Michael Ross

Central Bank

Remarks of Officials

Economic

Bond

Political

Data Interpretation

Brazil's Treasury has set a target for federal public debt to close the year between 9.7 trillion and 10.3 trillion reais ($1.86 to $1.98 trillion). This projection signals a potential increase of up to 19% from the 8.635 trillion reais recorded in 2025.

The forecast marks another year of double-digit expansion for the public debt of Latin America's largest economy, following an 18% increase last year.

Treasury Outlines New Financing Strategy

In its Annual Financing Plan, the Treasury detailed a strategy for a "more frequent market presence." The plan involves consistent U.S. dollar bond issuances and an openness to other currencies, including the euro and yuan, to diversify Brazil's financing sources.

A central objective is to gradually refine the public debt's composition. The Treasury aims to achieve this by increasing the share of fixed-rate bonds and extending the maturities of its debt instruments.

A Closer Look at the Debt Mix

According to its new guidelines, fixed-rate bonds are projected to represent 21% to 25% of the total debt by year-end, a shift from 22% in 2025.

Meanwhile, debt linked to the benchmark Selic interest rate is estimated to account for 46% to 50% of the total, after rising to 48.3% last year. These floating-rate bonds, known as LFTs, tend to be more attractive to investors during periods of elevated risk aversion. However, they also expose public debt servicing costs to sharp increases when interest rates climb.

Macro Headwinds: Interest Rates and Politics

Many market participants expect volatility to intensify this year due to Brazil's upcoming general election in October.

The nation's benchmark Selic rate currently stands at 15%, a near 20-year high, where it has remained since July. The central bank is holding rates firm to bring inflation back to its 3% target. This comes as the economy has been slow to show clear signs of cooling amid government stimulus under President Luiz Inacio Lula da Silva.

The sharp monetary tightening last year, which saw the Selic rise from 12.25%, was a primary driver of the increase in public debt. Policymakers are set to announce their next monetary policy decision late on Wednesday, with markets widely expecting another hold.

($1 = 5.2074 reais)

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Manuel

Political

Central Bank

The threat to the independence of the U.S. Federal Reserve is boosting economic uncertainty around the world, Bank of Canada Governor Tiff Macklem said on ‌Wednesday in his strongest comments to date on the outlook for the Fed.

U.S. President Donald Trump has ‌repeatedly criticized Fed Chairman Jerome Powell, demanding he cut interest rates. He is seeking to remove Fed governor Lisa Cook while the Department of Justice has threatened Powell with a criminal indictment.

Macklem made his remarks to reporters after keeping rates on ⁠hold amid what he called ‌unusually high levels of uncertainty.

"I think the threat to the independence of the central bank in the United States is one ‍thing that has sort of been contributing to this sense of uncertainty," he said.

"The Federal Reserve is the biggest, most important central bank in the world, and we all need it to work well. A loss of independence of the Fed would affect ‌us all," he added, saying Canada would be particularly affected given its close economic links to the United States.

Macklem was one of the central bank heads who earlier this month issued a joint statement backing Powell. Last September, Macklem said Trump's attempts to pressure the Fed were starting to hit markets.

Keeping central banks ⁠independent lets them take "difficult decisions" that benefit citizens, Macklem said.

"He is doing a good job at leading the Fed based on evidence, based on facts ... I hope it stays that way. That's going to be important for everyone," ‍he said.

Bank of Canada ⁠senior deputy governor Carolyn Rogers said a strong Fed benefited virtually every economy in the world because it kept markets and inflation stable.

"Those things ⁠contribute to predictability and less sort of volatility in rates ... there are a lot of reasons ‌for having a strong, independent Fed," she told the press conference.