Fed set to pause rate cuts, with no clear path to resuming

Federal Reserve officials this week are expected to stop cutting interest rates for the first time since September, holding steady after three consecutive reductions.

- Nick Timiraos

U.S. Federal Reserve officials disagree over when inflation data will justify further reductions.

The harder question is what it would take to start again.The answer depends on which risk materializes first: a job market that breaks, or inflation that convincingly resumes falling toward 2%.

Neither has happened since officials’ last meeting in December. Job growth has slowed sharply, but the unemployment rate has stabilized. Inflation remains stuck around 2.8%, above the Fed's 2% target, though some officials think the underlying trend is closer to their goal once the effects of tariffs are stripped out.

The result is a committee in a holding pattern—even as the Fed faces extraordinary political pressure from the White House—with most officials still expecting rate cuts are possible later this year but disagreeing over when the data will justify doing so.

The Justice Department this month opened a criminal investigation into Jerome Powell, which he disclosed in a startling video statement casting the probe as a pretext to advance President Trump’s desire for lower interest rates. Last week, the Supreme Court heard arguments over whether Trump can fire Fed governor Lisa Cook, with several justices expressing skepticism about the president’s authority to remove her. Trump’s advisers have suggested he is close to announcing his choice to succeed Powell, whose term as chair ends in May.