US Federal Reserve holds interest rates steady after recent cuts

The United States Federal Reserve has opted to hold its key interest rate steady, interrupting a recent series of reductions. As widely anticipated, the central bank maintained the federal funds rate target range at 3.5% to 3.75% during its latest policy meeting on Wednesday, signaling a cautious pause in its monetary easing cycle.

Assessment of the US Economy

In its accompanying statement, the Federal Open Market Committee (FOMC) assessed that US economic activity is expanding at a "solid" pace. It noted that job gains have remained low and the unemployment rate is showing signs of stabilization, while inflation continues to run "somewhat" above the Fed's long-term 2% target. The committee reaffirmed its dual mandate to achieve maximum employment and stable prices.

Forward Guidance and Internal Divergence

The Fed highlighted that uncertainty about the economic outlook remains elevated and it is attentive to risks. It stated that future decisions on the timing and extent of any policy adjustments would depend on a careful assessment of incoming data. The decision to hold rates was not unanimous; while ten FOMC members supported the pause, two governors—Stephen Miran and Christopher Waller—voted for an additional 25 basis point rate cut.

Context of the Recent Rate-Cutting Cycle

This decision follows three consecutive meetings with rate cuts, which began in September 2025 after a prolonged period of stability. Prior to that, the Fed had kept rates at a multi-decade high of 5.5% from July 2023 through September 2024, before embarking on a gradual easing path. The current pause indicates a more data-dependent and patient approach as policymakers gauge the effects of previous cuts on the world's largest economy, whose monetary policy decisions have significant spillover effects on global capital flows and emerging markets, including Türkiye.