The US Federal Reserve kept its benchmark interest rate unchanged on Wednesday, as policymakers continued to assess the strength of the labor market and the pace at which inflation is easing. The central bank kept the federal funds rate in the 3.5%–3.75% range, in line with market expectations, signaling caution amid mixed economic signals and mounting political pressure.

The decision comes at a time when inflation remains above the Fed’s long-term target, even as the US economy continues to show resilience. Recent data showed the unemployment rate fell to 4.4% in December, underscoring a still-tight labor market, despite relatively weak job creation.

At the same time, economists expect the price index of personal consumption expenditures, excluding food and energy, to rise about 3% YoY, well above the Fed’s 2% inflation target.

The meeting does not include updated quarterly estimates of growth, inflation and interest rates. The Fed’s most recent estimates, released after the December meeting, showed an average expectation of just one rate cut in 2026, reflecting a wide divergence of views among policymakers on the future path of rates.

The policy decision is also unfolding against an unusually tense political backdrop. US President Donald Trump has repeatedly criticized the Fed for keeping borrowing costs high and has called for immediate and sharp rate cuts to spur economic growth. Trump has also publicly attacked Fed Chairman Jerome Powell, raising concerns in financial markets about potential pressures on the central bank’s independence.

Those concerns have intensified following reports that the US Department of Justice has threatened Powell with possible criminal indictment, a move seen by many Republican senators as undermining the central bank’s independence. Some lawmakers have indicated that this could complicate the confirmation process for Powell’s successor.

Powell’s term as Fed chairman is set to end in May, and Trump is expected to nominate a replacement soon, with a Senate confirmation hearing likely. The sharp differences of opinion within the Fed show how difficult it can be for any new chair to push for anything more than a modest rate cut, regardless of political pressure.