When the Fed reduces its key rate, it tends to lower borrowing costs for things like mortgages, car loans and business borrowing, though those rates are also influenced by market forces.
The US Federal Reserve pushed the pause button on its interest rate cuts on Wednesday, leaving its key rate unchanged at about 3.6% after lowering it three times last year.
The central bank said in a statement that there are signs the job market has stabilised while it also said growth was "solid," an upgrade from last month’s characterisation as "modest."
With the economy growing at a healthy pace and no signs of deterioration in hiring, Fed officials likely see little reason to rush any further rate cuts.
While most policymakers do expect to reduce borrowing costs further this year, many want to see evidence that stubbornly-elevated inflation is moving closer to the central bank’s target of 2%.
According to the Fed’s preferred measure, inflation was 2.8% in November, slightly higher than a year ago.
Two officials dissented from the decision, with Governors Stephen Miran and Christopher Waller preferring another quarter-point reduction.
President Donald Trump appointed Miran in September and he had dissented at the three previous meetings in favour of a half-point cut.
Waller is under consideration by the White House to replace Chair Jerome Powell, whose term ends in May.
The Fed's decision to hold the key rate will likely fuel further criticism from Trump, who has slammed Powell for months for not sharply cutting short-term rates.
Fed officials meet this week in the shadow of unprecedented pressure from the Trump White House.
Powell said on 11 January that the Fed had received subpoenas from the Justice Department as part of a criminal investigation into his congressional testimony about a $2.5 billion building renovation.
When the Fed reduces its key rate, it tends to lower borrowing costs for things like mortgages, car loans and business borrowing, though those rates are also influenced by market forces.
A key issue facing the Fed is how long it will remain on hold. The rate-setting committee remains split between those officials opposed to further cuts until inflation comes down and those who want to lower rates to further support hiring.