The US Federal Reserve held its benchmark federal funds rate unchanged on Wednesday between the 3.5% - 3.75% target range, as widely expected.
This marked the end of a three consecutive rate cut run, as the bank had held the rate unchanged in the five previous meetings before cutting it at its Sept. 2025 meeting.
The Fed said available data suggested 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," said the central bank, adding that inflation remains "somewhat" elevated.
The Fed said the Federal Open Market Committee (FOMC), which makes decisions about interest rates, seeks to achieve maximum employment and inflation at the rate of 2% in the longer run.
"Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate," it emphasized.
The Fed said in considering the extent and timing of additional adjustments to the target range for the policy, the FOMC will "carefully" assess incoming data, the evolving outlook, and the balance of risks.
The decision to lower the rate by 25 basis points was supported by 10 of 12 governors, with Stephen Miran and Christopher Waller voting for a 25 basis point rate cut.
The move followed a mixed labor market in recent months. Maximum employment and stable prices are the dual mandate the Fed watches when determining monetary policy.
Employment gradually recovered in recent months after slowing in late 2025.
Nonfarm payrolls increased by 50,000 in December and by 56,000 in November, while the unemployment rate fell to 4.4%.
On the inflation front, the consumer price index (CPI) was up 2.7% annually in December, while rising 0.3% month-on-month, both matching expectations.
The rate cut also followed US President Donald Trump's repeated criticism of Fed Chair Jerome Powell, accusing him of failing to act swiftly as economic risks mount, and his intervention in the Fed's Board of Governors. Trump also said last month that he will "probably" bring a lawsuit against Powell.
Trump has repeatedly demanded that the central bank cut interest rates, citing moves by the European central banks, and warned that delays could stall the US economy.
Despite the political pressure, the Fed kept the rate unchanged for most of last year before starting an easing cycle due to a weakening labor market.
The central bank had kept the rate at the historically high level of 5.5% from July 2023 to Sept. 2024 before gradually lowering it to 4.5% in Dec. 2024.
