The US Federal Reserve on Wednesday kept the target range for the federal funds interest rate unchanged at 3.5 percent to 3.75 percent at its first policy meeting of 2026.

The decision follows three consecutive rate cuts in the second half of 2025.

In a statement, the US Federal Open Market Committee (FOMC) said "available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated." 

The committee added that it would carefully assess incoming data, the evolving outlook, and the balance of risks in considering the extent and timing of future rate cuts, while reiterating its commitment to supporting maximum employment and returning inflation to its 2 percent objective.

Of the 12 FOMC members, 10 voted for keeping the rate unchanged. Stephen Miran and Christopher Waller voted against the action, preferring to lower the interest rate by 25 basis points at the meeting.

US stock markets were mixed following the Fed decision, while the US dollar index rose. Gold prices pulled back temporarily before rising again.

Assessing the Fed's decision, JPMorgan said the recent stabilization in the unemployment rate should finally bring some cohesion to the FOMC.

GDS Wealth Management said rate cuts at the moment are not justified, given improving labor market data, stable inflation data and the simple fact that the Fed has just completed three rate cuts in a row.

On the other hand, Principal Asset Management noted that with leadership change approaching, the Fed may place slightly more emphasis on the employment side of its dual mandate.

The Fed also announced that the FOMC unanimously reaffirmed its Statement on Longer-Run Goals and Monetary Policy Strategy, which articulates its approach to monetary policy, at its annual organization meeting on Tuesday

Addressing the press, Fed Chair Jerome Powell said that the US economy expanded at a solid pace last year and is coming into 2026 on a firm footing.

But monetary policy is not on a preset course, Powell stated, adding that the committee would continue to make their interest rate cut decisions meeting-by-meeting based on incoming data.

Speaking on pressure on the Fed from the Trump administration, Powell offered a strong defense of central bank independence, saying it is a cornerstone of modern democracies and a safeguard against the politicization of monetary policy.

"The reason is that monetary policy can be used through an election cycle to affect the economy in a way that will be politically worthwhile," Powell said, adding "If you lose that, it's going to be hard to retain it."