The U.S. Federal Reserve on Wednesday kept interest rates unchanged after cutting them three times last year, signaling a cautious approach as inflation remains above its 2% target. Fed Chair Jerome Powell said the economic outlook has improved since December, with solid growth and signs of stabilization in the labor market reducing the urgency for immediate rate cuts.

Despite steady economic expansion and unemployment leveling off, policymakers remain divided. Some officials want to wait for stronger evidence that inflation is cooling, while others favor additional cuts to support hiring. The Fed’s preferred inflation measure stood at 2.8% in November, still higher than desired.

Powell also addressed the impact of tariffs, noting that price pressures from import taxes are expected to peak by mid-year before easing. The decision comes amid intense political scrutiny, with President Donald Trump continuing to criticize the Fed for not cutting rates faster. Wall Street now expects the central bank to hold rates steady at least until June, with most economists forecasting up to two cuts later in the year if inflation continues to slow.