Federal Reserve Maintains Interest Rates Amid Political Pressure

The Federal Reserve has decided to maintain interest rates in its first monetary policy meeting of 2026. Rates will remain within the range of 3.5 to 3.75 percent, a decision made on Wednesday. This action follows increasing pressure from President Donald Trump, who has urged for more aggressive rate cuts.

Federal Reserve’s Policy Goals

The Fed aims to achieve maximum employment and maintain inflation at a target rate of 2 percent over the long term. However, uncertainty regarding the economic outlook remains high. The Federal Reserve commented on economic activity, noting solid growth but low job gains.

Employment Trends

The US economy added 584,000 jobs in 2025, reflecting the lowest growth since 2003. Job performance in late 2025 showed some fluctuations:

• October saw job losses of 105,000.
• Payrolls increased by 64,000 in November.
• December recorded a gain of 50,000 jobs.

Despite this slight rebound, there are indications that job growth may slow down in the coming months. Recently, major employers like Amazon and UPS announced significant job cuts, influenced in part by the adoption of artificial intelligence technologies.

Potential Government Shutdown

Another threat to the economy is a possible government shutdown, which could occur as soon as Saturday. Such an event could lead to reduced spending as federal employees might not receive paychecks.

Political Pressures and Independence

The Fed’s decision to keep rates unchanged comes amidst political pressure from President Trump to implement rate cuts. Chairman Jerome Powell emphasized the independence of the central bank, particularly following a criminal investigation surrounding him.

Recent Developments

The Supreme Court recently addressed whether Trump could remove Fed Governor Lisa Cook over allegations of mortgage fraud. Powell attended this hearing as a show of support for Cook, demonstrating the growing intertwining of political and economic interests.

• Powell expressed the importance of the court case, calling it significant in the Fed’s history.
• Trump’s rhetoric suggests he desires a chairman aligned with his views, stating, “Anybody that disagrees with me will never be the Fed Chairman!”

In addition to Powell’s comments, the current political landscape has also drawn attention from global central banks. Tiff Macklem, the Governor of the Bank of Canada, commented on the implications of the Fed’s independence, noting its vital role in the global economy.

Market Reactions

The markets reacted modestly, with the Dow Jones Industrial Average and Nasdaq showing little movement. The S&P 500 experienced a slight decline of 0.1 percent during midday trading on Wednesday.

As the Fed navigates these complex dynamics, the focus remains on its ability to maintain independence while responding to significant political pressures.