Fed May Keep Rates Unchanged for Months01/28 06:01

   Federal Reserve officials are expected to keep their short-term interest 
rate unchanged Wednesday after three cuts last year, ignoring huge pressure for 
lower borrowing costs from the White House in favor of waiting to see how the 
economy evolves.

   WASHINGTON (AP) -- Federal Reserve officials are expected to keep their 
short-term interest rate unchanged Wednesday after three cuts last year, 
ignoring huge pressure for lower borrowing costs from the White House in favor 
of waiting to see how the economy evolves.

   The central bank's rate reductions last year were intended to shore up the 
economy and prevent a sharper deterioration in the job market, after hiring 
slowed to a near-crawl in the wake of President Donald Trump's sweeping tariffs 
last April. Yet there are signs that unemployment has stabilized and the 
economy could be picking up. At the same time, inflation remains stubbornly 
above the Fed's 2% target. All those trends argue for keeping rates where they 
are.

   A key issue that Chair Jerome Powell will likely address at his news 
conference Wednesday is how long the Fed 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.

   In December, just 12 of the 19 participants in the committee's meetings 
supported at least one more rate cut this year. Most economists forecast the 
Fed will cut twice this year, most likely at the June meeting or later.

   Fed officials meet this week in the shadow of unprecedented pressure from 
the Trump White House. Powell said Jan. 11 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. Powell in an 
unusually blunt video statement said the subpoenas were a pretext to punish the 
Fed for not cutting rates more quickly.

   And last week, the Supreme Court took up Trump's attempt from last year to 
fire Fed governor Lisa Cook over allegations of mortgage fraud, which she 
denies. No president has fired a governor in the Fed's 112-year history. The 
justices at an oral argument appeared to be leaning toward allowing her to stay 
in her job until the case is resolved.

   At the same time, Trump has suggested he is close to naming a new Fed Chair, 
to replace Powell once his term ends in May. The announcement could come as 
soon as this week, though it has been delayed before.

   The president's efforts to pressure the Fed may have backfired, economists 
say, as Republicans in the Senate voiced support for Powell and threatened to 
block Trump's replacement chair.

   "The last couple of weeks have been pretty positive for Fed independence," 
said Patricia Zobel, a former official at the New York Fed and now head of 
macroeconomic research at Guggenheim Invesments.

   Even so, all the turmoil may have led Powell to hunker down as he nears the 
end of his term as chair. Vincent Reinhart, a former Fed economist and now 
chief economist at BNY Investments, noted that Powell has given just one speech 
touching on the economy since September.

   He could be letting other Fed officials take on the job of explaining why 
the central bank may hold off on rate cuts in the coming months, Reinhart said. 
It also underscores that the chair does not make decisions on rates alone, he 
added,

   "The contribution of Chair Powell to news about our understanding of the 
next Fed move has been as small as it's ever been, over his tenure," Reinhart 
said.

   Only 12 of the 19 members of the Fed's rate-setting committee have a vote, 
including all seven members of the board of governors, the president of the New 
York Fed, and a rotating group of four presidents from the regional Fed banks.

   This year, Beth Hammack, president of the Cleveland Fed; Neel Kashkari, 
president of the Minneapolis Fed; Lorie Logan, president of the Dallas Fed; and 
Anna Paulson, president of the Philadelphia Fed, will vote on rate decisions. 
All have recently expressed some skepticism of the need for further cuts 
anytime soon.

   In a speech earlier this month, Paulson said an improving economy should 
allow more rate cuts later in the year.

   "I see inflation moderating, the labor market stabilizing and growth coming 
in around 2% this year," she said. "If all of that happens, then some modest 
further adjustments" to the Fed's key rate "would likely be appropriate later 
in the year."

   Larger-than-usual tax refunds over the next few months should help fuel more 
consumer spending, economists expect. And faster growth could eventually boost 
hiring, which has been noticeably weak even as the economy is expanding.

   With businesses barely adding jobs, consumers remain gloomy about the 
economy. The Conference Board's measure of consumer confidence dropped to an 
11-year low in January, the business research group said Tuesday.