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Fed set to pause rate cuts despite political pressure

Updated: 2026-01-29 09:54
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US Federal Reserve Chair Jerome Powell gestures during a press conference following a two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy, in Washington, DC, US, Jan 28, 2026. [Photo/Agencies]

WASHINGTON — The United States Federal Reserve is broadly expected to pause its series of interest rate cuts on Wednesday, resisting mounting attacks from the current administration, while policymakers await more data on the world's biggest economy.

The US central bank lowered rates in each of its last three policy meetings, bringing them to a range between 3.50 percent and 3.75 percent, as officials fretted about the cooling jobs market.

However, solid GDP growth, relatively low unemployment and stubborn inflation have given them reason to shift into wait-and-see mode.

The lack of urgency, nonetheless, could put the Fed again at odds with the White House, which has repeatedly called for large rate reductions.

The current administration has sharply escalated pressure on the Fed since Donald Trump returned to the White House a year ago, seeking to oust Fed Governor Lisa Cook over mortgage fraud allegations while his administration launched an investigation into Chairman Jerome Powell.

In a rare rebuke this month, Powell slammed the threat of criminal charges against him — over renovations to the Fed's headquarters — as a threat to central bank independence.

Yet, "while the Fed has been politically pressured to cut rates, it is not pressed by the data", said Gregory Daco, chief economist at EY-Parthenon.

Officials appear to have converged on a near-term halt in rate reductions, with their debate now centering around what conditions justify further rate cuts — and how quickly these should take place.

"The hurdle for additional near-term cuts has risen," Daco said.

Officials will be looking for "clearer, more durable evidence of disinflation" or renewed deterioration in the labor market before lowering rates again, he added.

While the Fed has seen deepening divides over interest rates, Dan North of Allianz Trade North America told Agence France-Presse that he expects "less dissent" in Wednesday's decision.

Fed Governor Stephen Miran, appointed by Trump last year to fill a term lasting until late January, is likely to again push for lower rates, North said.

However, it is unclear whether others on the board of governors such as Michelle Bowman and Christopher Waller would join him.

Agencies via Xinhua

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