Federal Reserve may keep rates unchanged for months as economy shows signs of health

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.

FILE - Federal Reserve Chair Jerome Powell speaks at the Federal Reserve, Wednesday, Dec. 10, 2025, in Washington. (AP Photo/Jacquelyn Martin, file)

Mississippi officials said they were sending 135 snowplows Wednesday to clear ice and snow from two interstate highways where frozen conditions caused huge traffic jams.

Emergency officials said they were rushing supplies to drivers stalled along ice-covered stretches of Interstates 55 and 22 in northern Mississippi, an area still reeling from a weekend winter storm that blasted parts of the South and the Northeast with ice and snow.

Helping stranded drivers and moving stalled vehicles “remains a top priority,“ Mississippi Gov. Tate Reeves said in a social media post. The Mississippi National Guard said citizen-soldiers equipped with wreckers began arriving before dawn to help clear I-55 and I-22.

Traffic remained snarled on the two interstates in northern Mississippi at mid-day Wednesday, many hours after problems began when plunging temperatures Tuesday night caused the highways to refreeze. Roadside cameras operated by the Mississippi Department of Transportation showed semitrucks and pickups bumper-to-bumper on stretches of I-22 lined with snow.

The Mississippi National Guard said citizen-soldiers equipped with wreckers began arriving before dawn to help clear I-55 and I-22.

In the small community of Red Banks, Mississippi, local authorities were asking people with all-terrain vehicles to bring water, food, blankets or gas to stranded motorists, said Lacey Clancy, who works at a cafe near I-22 and neighboring Highway 178.

Clancy said sheets of ice covered the highways and cars and trucks sat idle, covering the highways and backing up along on ramps and exit ramps.

“The highway kind of looks like a parking lot," Clancy said in a phone interview. “A lot of people have run out of gas, abandoned their vehicles.”

Most of the eastern U.S. was still grappling with frigid weather days after a weekend storm blasted the Northeast and parts of the South with snow and ice.

More than 380,000 homes and businesses, most of them in Mississippi and Tennessee, remained without electricity, according to the outage tracking website poweroutage.us. And at least 50 people had been reported dead in states afflicted by the dangerous cold.

The toll includes three Texas brothers — ages 6, 8 and 9 — who perished after falling through the frozen surface of a pond in Texas. Another child, a toddler, died at a Virginia hospital after being pulled from a frigid pond Monday, according to local police.

Temperatures in the Midwest and Northeast were forecast to remain well below freezing throughout the day Wednesday, according to the National Weather Service.

Residents still shivering in the South were getting little relief. In Nashville, Tennessee, where nearly 100,000 power outages lingered early Wednesday, high temperatures were to rise just above freezing before plunging to 13 F (minus 10 C) overnight.

One Nashville hospital was seeing a spike in patients being treated for carbon monoxide poisoning as people without electricity turned to fuel-burning generators, stoves, gas heaters and fireplaces to warm their homes. At least 48 children exposed to the deadly gas had been treated since Saturday at the emergency department at Monroe Carrell Jr. Children’s Hospital at Vanderbilt, spokesperson Jessica Pasley said.

Forecasters predicted even colder weather for much of the U.S. this weekend. A new blast of arctic air is expected Friday and Saturday from the northern Plains to the Southeast, where meteorologists say record cold could stretch as far as Miami.

The weather service said the prolonged freeze “could be the longest duration of cold in several decades.”

Forecasters said there is an increasing chance of heavy snow this weekend in the Carolinas and parts of Virginia, with more snowfall possible from Georgia to Maine.

Bynum reported from Savannah, Georgia. Martin reported from Atlanta. Associated Press writers Jonathan Mattise in Nashville, Tennessee, and Sarah Brumfield in Washington contributed to this report.

A tree blocks the road days after an ice storm in Nashville, Tenn., on Tuesday, Jan. 27, 2026. (AP Photo/Travis Loller)