Federal Reserve holds rates, Powell defends independence

The US Federal Reserve voted on Wednesday to keep interest rates unchanged, as chair Jerome Powell strongly defended the importance of the central bank’s independence amid political pressure and a federal investigation.

The Fed said it would maintain its key lending rate in the range of 3.5 percent to 3.75 percent, noting that economic activity in the United States continues to expand at a solid pace. The decision comes as President Donald Trump has repeatedly criticised Powell for not cutting rates faster.

Federal prosecutors recently opened a criminal investigation into testimony Powell gave to the Senate regarding renovations of Federal Reserve buildings. Powell declined to comment on the probe but warned that losing central bank independence would severely damage the institution’s credibility.

Speaking at a press conference, Powell said the independence of the Fed has long served the public by keeping monetary policy free from political influence. He added that restoring trust would be difficult if that independence were undermined, stressing his strong commitment to preserving it.

Trump is expected to announce a successor for Powell, whose term as chair ends in May. Former Fed leaders have criticised the investigation, calling it an attempt to weaken the central bank’s autonomy.

Explaining the rate decision, Powell said the US economy has again exceeded expectations. While job creation has slowed, the unemployment rate has edged lower, and the effects of three interest rate cuts made last year are still being assessed.

Powell acknowledged ongoing tension between employment and inflation but said it has eased. Inflation remains above the Fed’s 2 percent target, though concerns about a weakening labour market have diminished in recent weeks.

The S&P 500 fluctuated during the day, briefly crossing the 7,000 mark for the first time before ending little changed.

Two officials dissented from the decision, voting in favour of a rate cut. They were Stephen Miran, currently on leave from his White House role, and Christopher Waller, a Trump appointee seen as a possible successor to Powell.

Despite the dissent, the Fed said stronger recent economic data supported holding rates steady. Analysts said the pause leaves room for possible rate cuts later in the year, though patience will be required.

Trump has publicly urged rate cuts to reduce government borrowing costs and ease lending conditions for Americans. He has also personally criticised Powell and targeted Fed governor Lisa Cook, whose case is now before the Supreme Court.

Powell described the Supreme Court case as potentially the most important legal challenge in the Fed’s 113-year history. Attention is also focused on Trump’s choice to replace Powell, as concerns grow over whether the next chair will be able to act independently.