The Federal Reserve on Wednesday announced it will leave interest rates unchanged, pausing a streak of three consecutive cuts amid uncertainty over the labor market and persistent inflation.

Policymakers voted to keep the federal funds rate at 3.5%–3.75%, following three successive 25-basis-point cuts in September, October, and December of last year. The pause reflects growing caution as economic data signals a slowing labor market while inflation continues to exceed the Fed’s 2% target.

Fed Chair Jerome Powell noted that inflation remains elevated, with the personal consumption expenditures (PCE) index rising 2.9% over the past year through December. “Elevated readings largely reflect inflation in the goods sector, which has been boosted by the effects of tariffs,” Powell said, while adding that the services sector has experienced disinflation.

When asked whether current rates are near neutral, Powell described the assessment as subjective: “It’s hard to look at the incoming data and say that policy’s significantly restrictive at this time… it may be loosely neutral or somewhat restrictive, you know, it’s in the eye of the beholder.”

After cutting 175 basis points over the past two years, the Fed now plans to let the data guide future decisions, Powell said, signaling a patient approach as policymakers weigh the timing of any additional moves.

In the coming week President Trump will appoint a NEW Federal Reserve Chairman to replace Powell.