US Federal Reserve keeps interest rates on hold

2026-01-29 08:33:00, Kosova & Bota CNA

The US Federal Reserve has voted to keep interest rates on hold, with its chairman, Jerome Powell, defending the importance of the central bank's independence. The Federal Reserve said it would keep its key lending rate between 3.5% and 3.75%, saying that economic activity in the US "has been expanding at a sustained pace."

U.S. President Donald Trump has frequently criticized Powell for not cutting interest rates quickly enough. Federal prosecutors recently opened a criminal investigation into testimony Powell gave to the Senate about renovations to the Federal Reserve’s buildings. On Wednesday, Powell declined to comment on the investigation, but said that if a central bank loses its independence “it would be difficult to restore the credibility of the institution.” Powell had previously said he believed the federal investigation stemmed from Trump’s anger at the pace of interest rate cuts.

On Wednesday, in his first press conference since the Department of Justice (DoJ) investigation was condemned, he stressed the importance of central bank independence to ensure that monetary policy is not used for political gain.

"It's simply an institutional arrangement that has served the people well - not having direct control of elected officials over the setting of monetary policy. If you lose that, first of all it will be difficult to restore the credibility of the institution," Powell said, adding that he is "firmly committed" to preserving the independence of the Federal Reserve.

Trump is expected to soon announce a replacement for Powell, who steps down as chairman in May. Former U.S. central bankers have also sharply criticized the Justice Department investigation, describing it as an attempt to undermine the Federal Reserve's autonomy.

Commenting on the decision to keep interest rates on hold, Powell said: "The economy has surprised us once again with its strength." There are signs that the labor market is stabilizing - job creation is sluggish, but the unemployment rate has fallen. Policymakers are continuing to monitor the effect on the economy of three interest rate cuts last year.

Powell said: "We still have some tension between employment and inflation, but it is smaller than it was. The outlook for economic activity has clearly improved since the last meeting."