US Fed Holds Interest Rates, Powell Defends Central Bank Independence

US Federal Reserve holds interest rates steady as Chair Jerome Powell defends central bank independence amid political pressure.

Federal Reserve Keeps Rates Steady

The US Federal Reserve has decided to hold interest rates steady, maintaining its key lending rate in the range of 3.5% to 3.75%, as policymakers assess economic conditions and inflation trends. The decision reflects growing confidence that the US economy continues to expand at a solid pace, despite lingering challenges.

Speaking after the announcement, Fed Chair Jerome Powell said recent economic data shows resilience, particularly in consumer spending and overall activity.

Powell Pushes Back Amid Political Pressure

Powell used his first press conference since a recent Department of Justice probe to strongly defend the independence of the central bank, warning that political interference could undermine public trust.

“If a central bank loses its independence, it would be hard to restore the credibility of the institution,” Powell said, stressing that monetary policy must remain free from direct political control.

US President Donald Trump has repeatedly criticized Powell for not cutting rates faster, arguing that lower rates would reduce government borrowing costs and make mortgages more affordable for Americans.

Legal Scrutiny Raises Stakes for the Fed

Federal prosecutors recently opened a criminal investigation into testimony Powell gave to the Senate regarding renovations of Federal Reserve buildings. Powell declined to comment directly on the probe but suggested it stemmed from frustration over the pace of interest rate cuts.

Former Fed leaders have condemned the investigation, calling it an attempt to weaken the institution’s autonomy. Powell described a related Supreme Court case involving Fed governance as “perhaps the most important legal case in the Fed’s 113-year history.”

Economy Shows Signs of Stability

Powell noted that while job growth has slowed, the unemployment rate has edged lower, suggesting the labor market is stabilizing. Inflation remains above the Fed’s 2% target, but pressures have eased compared to last year.

“We still have some tension between employment and inflation, but it’s less than it was,” Powell said, adding that the outlook for economic activity has improved since the Fed’s previous meeting.

Divisions Within the Fed

The decision to hold rates was not unanimous. Two officials — Stephen Miran and Christopher Waller — voted in favor of a rate cut, highlighting internal debate over how soon borrowing costs should be lowered.

Despite those dissenting votes, the majority of policymakers pointed to stronger economic data as justification for maintaining current rates.

Market Reaction and Future Outlook

Financial markets showed limited reaction to Powell’s remarks. The S&P 500 briefly crossed the 7,000-point mark before closing largely unchanged, as investors weighed the Fed’s cautious stance.

Analysts say the door remains open for rate cuts later this year, but patience will be required.

“Lower interest rates may be coming, but investors will have to remain patient,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.

Uncertainty Over Fed Leadership

Adding to uncertainty is Powell’s upcoming departure as Fed chair in May, with President Trump expected to announce a successor soon. BlackRock executive Rick Rieder has emerged as a potential front-runner.

Whoever replaces Powell will face immediate scrutiny, as ongoing political pressure raises questions about whether the next chair will be able to act independently.

Conclusion

The Federal Reserve’s decision to hold interest rates underscores its cautious approach amid improving economic signals and persistent inflation concerns. At the same time, Jerome Powell’s firm defense of central bank independence highlights growing tensions between monetary policy and political influence. As leadership changes loom and legal challenges unfold, the Fed’s credibility and autonomy remain at the center of one of the most consequential periods in its history.