Washington, Jan 29 (NationPress) The Federal Reserve opted to keep interest rates unchanged. Chair Jerome Powell indicated that inflation remains "somewhat elevated," with tariffs contributing to the rise in goods prices.

The Federal Open Market Committee announced, "we have decided to keep our policy rate steady," Powell informed reporters on Wednesday (local time). The Fed has maintained the target range for the federal funds rate at 3.5 percent to 3.75 percent.

Powell stated that the economy has "expanded at a solid pace last year" and is beginning 2026 "on a firm footing." He noted that consumer spending has shown "resilience," while business investment continues to grow. However, he mentioned that housing remains "weak."

He also referred to the recent federal government shutdown, suggesting it "likely weighed on economic activity last quarter." He believes these effects "should be reversed as the reopening promotes growth this quarter."

Regarding job conditions, Powell mentioned they "may be stabilizing after a period of gradual softening." The unemployment rate stood at 4.4 percent in December and has "changed little in recent months."

However, he acknowledged that job growth has been sluggish, with "total nonfarm payrolls declining at an average pace of 22,000 per month over the last three months." Excluding government jobs, he said private payrolls increased by an average of 29,000 per month.

Powell explained that the slowdown in job growth is partly connected to the labor supply. He stated, "A significant portion of the deceleration reflects a decline in the growth of the labor force due to reduced immigration and labor force participation." He added that "labor demand has clearly softened as well."

While Powell noted that inflation has eased since 2022, he clarified that it remains above the Fed's target. He referred to estimates showing total PCE prices rose 2.9 percent over the 12 months ending in December, with core PCE rising 3.0 percent during the same period.

"These high readings largely reflect inflation in the goods sector, which has been influenced by the effects of tariffs," Powell said. He emphasized that services are showing more progress, noting, "Disinflation appears to be continuing in the services sector."

When asked about the extent to which tariff effects have permeated the economy, Powell stated, "A lot of it has." He predicted that tariffs are "likely to move through and represent a one-time price increase."

Powell expressed that the Fed anticipates the impact of tariffs to peak before diminishing. "We expect to see the effects of tariffs flowing through goods prices peak and then start to decline," he stated, "assuming no new major tariff increases occur."

He clarified that the Fed is not adhering to a predetermined schedule for future actions. "Monetary policy is not on a preset course," he remarked, indicating decisions will be made "on a meeting-by-meeting basis."

Powell mentioned that the Fed could consider easing again if inflation subsides and the job market weakens. "A deteriorating labor market would support loosening," he noted, while also emphasizing the Fed's vigilance on inflation.

In response to an inquiry about potential rate hikes, Powell stated: "We don’t rule anything out." However, he added that it is not the primary expectation. "It isn’t anyone’s base case right now that the next move will be a rate hike," he commented.

Powell raised concerns about US deficits, stating that the federal budget deficit is "uncontroversially on an unsustainable path." He emphasized, "The sooner we address it, the better."

Defending the independence of the central bank, Powell asserted the importance of the Fed's separation from elected officials, citing it as standard practice in major democracies. He warned that rebuilding credibility would be challenging if the public questions the Fed's motives.

"If you lose that, it’s going to be hard to regain it," he stated, adding, "I’m firmly committed to that, as are my colleagues."