The Federal Reserve Enters a Pause Phase

As expected, the Fed opted for the status quo today. This decision was fully anticipated by markets and by all forecasters surveyed by Bloomberg. While there is unanimity among Fed watchers, the same cannot be said within the FOMC (Federal Open Market Committee) itself. Two governors would have preferred a 25‑basis-point cut: Stephen Miran—appointed last year by President Trump and whose current term officially ends this weekend—and Christopher Waller, often mentioned among the potential successor to Jerome Powell as head of the central bank.

Expectations were so well aligned with today’s decision because the Fed had already signalled this possibility following its last meeting. Recall that policymakers’ December projections for the federal funds rate pointed to only one 25‑basis-point cut in 2026. Moreover, economic conditions—at least based on indicators published over the past six weeks—did not suggest any need to change course. Job creation is indeed relatively weak and recent inflation data show no renewed acceleration, but consumption and real GDP growth continue to demonstrate surprising resilience despite last fall budget shutdown. Weekly jobless claims also remain low. Overall, conditions appear relatively stable, paving the way for a steady monetary policy stance. In fact, today’s statement removes the earlier reference to greater downside risks. During the press conference, Jerome Powell noted that the economic outlook has improved significantly since the last meeting.

That said, risks persist, though they are broadly balanced. Inflation could eventually prove more persistent due to tariffs, particularly for goods prices. Another, albeit partial, budget shutdown could also begin on Sunday. The “fog” referenced by Powell last fall has lifted somewhat, but not entirely. Powell made no suggestion of an imminent rate cut—or hike—and instead repeated the familiar message that monetary policy is not on a preset path and decisions will be made on a meeting‑by‑meeting basis.

During the press conference, Powell also declined to answer questions about pressures from the White House, his future at the Fed, or the choice of the institution’s next leader. However, he did take a moment to emphasize the importance of central bank independence.