The Federal Reserve on Wednesday voted to take a break from a recent run of interest rate cuts, as the central bank navigates questions about its independence and awaits a new leader.

Meeting market expectations, the central bank’s Federal Open Market Committee voted to keep its key interest rate in a range between 3.5%-3.75%. The decision put a halt to three consecutive quarter percentage point reductions, billed as maintenance moves to guard against potential downturns in the labor market.

In voting to hold the line, the committee raised its assessment of economic growth. It also eased its concerns about the labor market as compared with inflation.

“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 said. “Inflation remains somewhat elevated.” 

Importantly, the statement also erased a clause indicating that the committee saw a higher risk from the threat of a weakening labor market than that of heightened inflation. That would argue for a pause on rate cuts at least in the near term as officials see the Fed’s dual goals of low inflation and full employment more in balance.

There was little in the way of guidance about what’s coming next, with markets expecting the Fed to wait until at least June before adjusting its benchmark rate again.

“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 statement said, repeating language inserted in December that markets saw as a shift away from the easing cycle that began in September 2025.

Treasury yields moved higher following the decision, while the S&P 500 hovered just 7,000.

As has been the case for recent meetings, there were dissents.

Governors Stephen Miran and Christopher Waller voted against the hold, with both advocating another quarter-point cut. This was Miran’s fourth consecutive dissent, however, he had previously advocated for a deeper half-point cut.

Both officials were appointed by President Donald Trump, with Miran filing an unexpired board seat in September 2025 and Waller appointed during Trump’s first term. Miran’s term expires Saturday, while Waller interviewed for the Fed chair’s job but is considered a long shot.

The other 10 FOMC members approved the hold, a group that included a new group of four regional presidents who joined the seven governors and New York Fed President John Williams as voters.

The routine nature of the decision comes at a time when nothing is routine for the central bank.

Chair Jerome Powell has just two more meetings before his term at the helm ends, ending a tumultuous eight years at the Fed that has included a global pandemic, a steep recession and a seemingly endless series of battles against Trump.

“If you look at the incoming data since the last meeting, [there is] clear improvement in the outlook for growth,” Powell said during a news conference. “Inflation performed about as expected, and … some of the labor market data came in suggesting evidence of stabilization. So it’s overall, a stronger forecast, really.”

Most recently, the Justice Department has subpoenaed Powell over the extensive renovations at the Fed’s headquarters in Washington, D.C. Before that, the president threatened on multiple occasions to fire Powell and in fact has moved to sack Governor Lisa Cook, a case that is now pending a decision from the U.S. Supreme Court.

When asked about his decision to attend oral arguments at the high court, Powell said the case is “perhaps the most important” in the Fed’s 113-year history.

Underscoring all of the tension has been a battle over the Fed’s independence, or its ability to operate without political interference. In confirming the Justice Department probe, an unusually candid Powell attributed the threat to Trump’s efforts to control monetary policy. Prior presidents also have criticized Fed decisions and tried to coerce policymakers into rate cuts, but none have been as aggressive or public about it as Trump.

The Fed also has a challenging economic backdrop to navigate.

Growth as measured by the widest measure, gross domestic product, has been robust. The third quarter motored ahead at a 4.4% clip and the final three months of the year are tracking at a 5.4% rate, according to the Atlanta Fed.

At the same time, hiring is slow in the labor market amid a Trump administration crackdown on illegal immigration. However, layoffs also have been tame, with the trend for initial jobless claims running at its lowest level in two years.

Inflation, though, has proven more troublesome. While off its 40-year highs back in 2022, the rate is still running closer to 3% than the Fed’s 2% goal, causing concern among some FOMC officials who either want rate cuts paused or eliminated until there’s more evidence that price increases are easing.

Trump’s tariffs are running in the background when it comes to inflation, with Fed economists generally seeing the duties as adding near-term pressures that will abate later this year.

Futures markets are pricing in at most two rate reductions in 2026 and none in 2027, regardless of the next Fed chair. Predictions markets are pointing to BlackRock bond chief Rick Rieder as the likely candidate to succeed Powell.