NEW YORK / ISTANBUL

The US Fed is widely expected to keep interest rates unchanged in the 3.5–3.75% range at its first monetary policy meeting of 2026 on Wednesday.

The Federal Open Market Committee (FOMC) cut the Fed’s policy rate by a total of 75 basis points in September, October, and December 2025.

The decision comes amid mounting political pressure and ongoing legal disputes involving the central bank.

US President Donald Trump has repeatedly called on the Fed to cut rates, while his administration has launched a criminal probe into Fed Chair Jerome Powell.

Recent US economic data point to strong growth, with inflation hovering above the Fed’s target and a slowdown in employment growth.

Nonfarm payrolls rose by 50,000 in December, well below estimates, bringing total job growth to 584,000 in 2025.

The unemployment rate declined to 4.4% in Dec. 2025 from 4.5% the previous month.

The country’s Consumer Price Index (CPI) rose 0.3% month-on-month and 2.7% year-on-year in December, in line with expectations.

Core CPI—the Fed’s inflation indicator—climbed 2.8% on an annual basis in Nov. 2025, also meeting forecasts.

The US economy expanded by 4.4% in the third quarter of 2025, surpassing projections and marking the fastest performance since the third quarter of 2023.

Trump’s legal pressure on the Fed

Fed Chair Jerome Powell said this month that the US Justice Department had threatened to file criminal charges against him related to the renovation of Federal Reserve buildings.

Powell argues that the allegations against him stem from policy decisions.

He reiterated that he carries out his duties free from political pressure or favoritism, focusing solely on price stability and maximum employment.

Analysts say the probe into Powell is a clear escalation of the second Trump administration’s efforts to pressure the Fed into lowering rates.

Former Fed chairs Janet Yellen, Ben Bernanke, and Alan Greenspan, along with leaders of major global central banks, have warned that such actions pose a direct threat to the Fed’s independence.

Legal proceedings involving Fed Board Member Lisa Cook are ongoing.

Trump said on Aug. 25, 2025, that he was removing Cook from office over alleged false statements in mortgage contracts.

Last week, the Supreme Court heard arguments in the case challenging Trump’s attempt to remove Cook.

Justice Brett Kavanaugh warned that the definition of “for cause” advanced by Trump’s legal team as the reason to dismiss Cook "would weaken, if not shatter, the independence of the Federal Reserve.”

Trump seeks Fed chair who sees eye-to-eye

Trump has repeatedly criticized the Fed’s monetary policy since beginning his second term, arguing that rates have not been cut as aggressively as he would like.

He has frequently insulted Powell and said he would soon announce his successor.

While Powell’s term is to expire in May of this year, Trump wants a Fed chair who will lower rates as he wishes.

“Anybody that disagrees with me will never be the Fed Chairman,” said Trump in a long Truth Social post in late December.

Potential candidates to lead the Fed include US-based asset management titan BlackRock’s Chief Investment Officer Rick Rieder, Fed Board Member Christopher Waller, and former Fed Board Member Kevin Warsh.

Trump has also said he wants Kevin Hassett, director of the National Economic Council, to remain at the White House.

More pressure needed for early rate cut

Padhraic Garvey, regional head of research at ING Financial Markets’ Americas division, told Anadolu that employment growth has effectively stalled, noting that a “K-shaped recovery” highlights the economy’s fragility.

He stated that inflation showed tariffs did not have as strong an impact on prices as initially feared, though this did not mean price increases would disappear entirely in the future.

Garvey said the Fed is expected to cut rates at its June and September meetings this year, while an earlier March rate cut would require more pressure on the bank’s inflation and employment targets.

He mentioned that consecutive declines in employment would be needed in January and February for a potential rate cut in March.

Garvey forecasts two additional rate cuts in 2026, while monetary policy remains moderately restrictive.

He noted that the Fed may move closer to a neutral stance if employment continues to lose momentum.