Fed Holds Rates Steady as Powell Warns Against Threats to Central Bank Independence

By Blessing Nweke

The US Federal Reserve has voted to keep interest rates unchanged, as chair Jerome Powell mounted a robust defence of central bank independence amid mounting political pressure and a federal criminal investigation linked to his testimony.

The Fed said it would maintain its benchmark lending rate in a range of 3.5% to 3.75%, noting that economic activity in the United States “has been expanding at a solid pace.” Speaking at a press conference on Wednesday, Powell said the economy had once again “surprised us with its strength,” while acknowledging lingering tension between employment and inflation.

Powell declined to comment directly on a criminal probe opened by federal prosecutors into statements he made to the Senate about renovations to Federal Reserve buildings. However, he warned that any erosion of the Fed’s independence would have serious consequences. “If you lose that, it first of all would be hard to restore the credibility of the institution,” he said, adding that he was “strongly committed” to preserving the Fed’s autonomy.

US President Donald Trump has repeatedly criticised Powell for failing to cut interest rates more aggressively, arguing that lower rates would reduce government borrowing costs and make mortgages more affordable. Trump, who appointed Powell during his first term, has also launched personal attacks against the Fed chair and is expected to name a successor before Powell steps down in May.

Two Fed officials dissented from the decision, voting in favour of a rate cut, but most policymakers pointed to stronger recent data as justification for holding steady. While job creation remains sluggish, unemployment has edged lower, and concerns about a deteriorating labour market have eased.

Inflation, however, remains above the Fed’s 2% target, keeping pressure on policymakers. Financial markets were muted following the announcement, with the S&P 500 briefly topping 7,000 points before ending little changed.

Former Fed leaders have criticised the Justice Department investigation as a threat to the institution’s independence. Powell described a related Supreme Court case involving Fed governor Lisa Cook as potentially “the most important legal case in the Fed’s 113-year history.”

Despite the pause, analysts say rate cuts could still come later this year, though patience will be required.