The decision was not unanimous among FOMC members, as two of them preferred to lower rates.
The Federal Open Market Committee (FOMC) of the U.S. Federal Reserve decided this Wednesday to leave interest rates unchanged in the target range of 3.50% to 3.75%, the lowest level since the end of 2022.
This pause contrasts with the series of 25-basis-point cuts agreed upon on September 17, October 29, and December 10, and hints at a return to the sequence of five consecutive times that the central bank kept the price of money frozen starting in January 2025.
“Available data suggest that economic activity has expanded at a solid pace. Job growth has remained subdued, and the unemployment rate has shown some signs of stabilizing. Inflation remains somewhat elevated,” the Fed summarized.
In its statement, the institution emphasized that uncertainty about the economic outlook remains “high,” so the central bank’s governing body will continue to “monitor” the risks to employment and inflation.
The FOMC indicated that, when considering modifying the benchmark rate, it will analyze “in detail” incoming data, the macroeconomic environment, and the balance of risks.
The Fed assured that it is “prepared” to adjust rates if necessary, for which it will study labor market and inflation data and their expected future evolution, as well as the effects of international and financial developments.
VOTING DISAGREEMENTS
Wednesday’s decision was not unanimous among FOMC members, as Stephen Miran and Christopher Waller advocated for a 25-basis-point cut, contrary to the majority. Miran’s dissent is noteworthy, given that it falls within the context of the open conflict between Fed Chair Jerome Powell and Donald Trump, who insists on lowering interest rates at all costs. Miran was appointed in September 2025 by the president to push for a drastic reduction.
Other governors aligned with Trump’s intention to lower rates include Vice Chair for Supervision Michelle Bowman and Christopher Waller. The former voted in favor of maintaining them, while the latter voted to reduce them by a quarter of a point.
It is worth remembering that Bowman was nominated for her current position by President Trump, while Waller is considered a frontrunner to lead the Fed when Powell’s term expires in May of this year.
ECONOMIC FORECASTS
The Fed’s central projection published in December indicates that interest rates in 2025 would be between 3.6% and 3.9%, two-tenths of a percentage point lower than in September for the upper end of the range. For 2026 and 2027, the forecast is that the range will be between 2.9% and 3.6% in both cases, unchanged.
Regarding macroeconomic trends, the institution improved its outlook. It revised upward by one-tenth of a percentage point, to 1.7%, the country’s GDP growth for 2025. In addition, the figure for 2026 was raised by half a percentage point, to 2.3%, and those for 2027 and 2028 by one-tenth of a percentage point, to 2% and 1.9%, respectively.
With respect to unemployment, the Fed predicted that the country would have an unemployment rate of 4.5% in 2025 and 4.4% in 2026, unchanged from the estimate made three months ago. In 2027, it will remain at 4.2%, one-tenth of a percentage point lower, while in 2028 it would continue at the same level. Inflation, for its part, will be 2.9% at the end of 2025, one-tenth of a percentage point lower than in September, and core inflation, which excludes energy and food prices due to their greater volatility, will be 3%, also one-tenth of a percentage point lower.
In 2026, the overall index would be 2.4% and the core index 2.5%, two and one-tenth of a percentage point lower, respectively, while in 2027 both the overall and core inflation rates would coincide at 2.1%, the same as in the September estimates. In 2028, both would finally reach the 2% target.
