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The central bank voted in a split decision to hold its benchmark interest rate in the range of 3.5% to 3.75%. Fed Governors Chris Waller and Stephen Miran disagreed with the decision, preferring to cut rates by a quarter percentage point.
Before the meeting, Waller — one of President Trump’s finalists to be the next Fed chair — cited ongoing concerns about the health of the job market.
Officials upgraded their assessment of the economy to “solid” from “moderate” on the back of a strong third quarter GDP reading and expectations for a strong fourth quarter.
They still see inflation as “somewhat elevated,” but said the job market is showing “some signs of stabilization” and removed language that “downside risks to employment rose in recent months.” Officials simply stated the “Committee is attentive to the risks to both sides of its dual mandate.”
Policymakers reiterated “in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”
The December jobs report indicated payroll growth remains soft, though the unemployment rate dropped to 4.4% after ticking up in November. The Fed cut rates three times last year to try to cushion weak payroll numbers.
At the same time, recent reports show inflation is still stuck above the Fed’s 2% goal. The Consumer Price Index for December on a “core” basis, which excludes volatile food and energy prices, stands at 2.6%, holding the same level seen from September through November.
A less clean reading on the Fed’s preferred inflation gauge — the “core” Personal Consumption Expenditures Index — showed more elevated inflation at 2.8% for November. That data was delayed because of lingering impacts of last fall’s government shutdown.
The decision to hold rates steady comes as Trump continues to call for lower rates and tensions between the White House and the Fed reached new heights. Powell revealed earlier this month that the administration had opened a criminal investigation into testimony he gave last summer on the renovation of the Fed’s headquarters.
Trump is expected to name a new chair soon to replace Powell, whose term ends in May.
Officials also reaffirmed their committment to their longer-run goals for price stability and maximum employment, which the central bank reaffirmed in August.
Read more: How a Fed rate cut affects your bank accounts, loans, credit cards, and investments
Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.