The Federal Reserve’s Open Market Committee voted Wednesday to leave interest rates unchanged in a range between 3.5%-3.75%, and defying calls from the administration to cut them.
Fed Chair Jerome Powell announced the vote at a press conference Wednesday afternoon.
“We see the current stance of monetary policy as appropriate to encourage progress toward both our maximum employment and 2% inflation goals,” Powell said Wednesday. He said he viewed the economy in a favorable light, saying the economy is expanding at a “solid pace.”
“While job gains have remained low, the unemployment rate has shown some signs of stabilization,” Powell said.
The vote marked the central bank’s first since news surfaced of a federal criminal investigation into Powell by the U.S. Department of Justice.
How They Voted
In a statement, the Fed said that voting for the action were Powell, John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Beth M. Hammack; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Anna Paulson. Voting against it were Stephen I. Miran and Christopher J. Waller, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.
The central bank’s decision ended the string of three consecutive quarter percentage point reductions, billed as maintenance moves to guard against potential downturns in the labor market, CNBC said.
In its vote Wednesday, the committee also upped its assessment of economic growth and it eased its concerns about the labor market as compared to inflation.
Fed Has Dual Role to Fulfill
“Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization,” the post-meeting statement stated. “Inflation remains somewhat elevated.”
The statement also erased a clause indicating that the committee saw a higher risk to a weakening labor market than heightened inflation, CNBC said. That would argue for a more patient approach to policy as officials see the Fed’s dual goals of low inflation and full employment more in balance, according to CNBC.
The investigation into Powell ratcheted up a remarkable conflict between the nation’s top central banker and the White House, which has urged the Fed to significantly reduce interest rates. Powell was appointed chair in 2017 during President Donald Trump’s first term and he was reappointed by President Joe Biden.
The central bank was widely expected to defy Trump’s wishes to lower the rates.
Two Rate Cuts Still Predicted This Year
Futures markets expect two quarter-point interest rate cuts this year, predicting the first in June and a second in the fall, according to CME FedWatch Tool, a measure of market sentiment.
The federal investigation appears to center on Powell’s testimony to Congress last year about cost overruns in a multi-billion-dollar office renovation project. Powell issued a rare video message earlier this month rebuking the probe as a politically motivated effort to influence the Fed’s interest rate policy.
The investigation follows months of criticism leveled by Trump against at the Fed. Trump denied any involvement in the criminal investigation during a brief interview with NBC News hours after the Fed posted Powell’s video.
Hiring has slowed dramatically over the past year while inflation has remained elevated. That risks an economic double-whammy known as “stagflation,” according to ABC News.
Powell has not announced his plans after his term as chair ends, but it is possible he could stay as a Governor. At Wednesday’s press conference, Powell declined to answer a question about his future.
