Federal Reserve holds interest rates steady

The Federal Reserve held interest rates steady on Wednesday, pausing its rate-cutting cycle after three consecutive cuts amid continued uncertainty over the labor market and inflation.

The decision leaves the target range for the federal funds rate at 3.5% to 3.75%, a level central bankers believe is "loosely neutral."

Fed Chair Jerome Powell said the economy remains on "firm footing," noting that while job gains have "remained low," the unemployment rate has "shown some signs of stabilization."

He said a "good part" of the slowdown in job growth reflects declining immigration and labor force participation, while acknowledging that demand in the labor market has "clearly softened as well."

Mr. Powell said that while inflation "remains somewhat elevated," central bankers are not as concerned as they once were.

"These elevated readings largely reflect inflation in the goods sector, which has been boosted by the effects of tariffs. In contrast, disinflation appears to be continuing in the services sector," he said.

As has been the case over the past several meetings, the decision drew two dissents from members of the Federal Open Market Committee (FOMC), the body that sets monetary policy.

Stephen Miran and Christopher Waller — both governors appointed by President Trump — voted instead for a quarter-point rate cut.

Mr. Powell said the Fed would continue to approach future rate decisions "meeting by meeting," guided by incoming economic data.

"After the three recent rate cuts, we're well-positioned to address the risks that we face on both sides of our dual mandate," he said, referring to the Fed's goals of maximum employment and stable prices. "We'll be looking to our goal variables and letting the data light the way for us."