Many Americans want lower interest rates because cheaper loans can help people buy homes, cars, or start businesses. But on April 29, 2026, the Federal Reserve decided to keep its key policy rate unchanged at 3.5% to 3.75%. The main reason is simple: inflation is still above the Fed’s 2% goal, so officials do not yet feel safe cutting rates again. (federalreserve.gov)
Inflation has improved since its peak a few years ago, but it is still not low enough. The Fed’s preferred inflation measure, the PCE price index, rose 3.5% in March 2026 from a year earlier, while core PCE, which excludes food and energy, rose 3.2%. In his April 29 press conference, Chair Jerome Powell said higher global energy prices linked to the conflict in the Middle East had pushed up overall inflation. He also said tariffs were helping raise prices for goods. If the Fed cuts rates too early, inflation could stay high for longer. (bea.gov)
Another reason is that the U.S. economy is still growing. The Fed said economic activity has been expanding at a solid pace. Powell described consumer spending as resilient and business investment as brisk. The U.S. economy grew at a 2.0% annual rate in the first quarter of 2026. The labor market has cooled, and job gains have remained low, but the unemployment rate was still only 4.3% in March. In other words, the economy looks slower than before, but not weak enough to force emergency rate cuts. (federalreserve.gov)
So why are U.S. rates still not falling? Because the Fed is balancing two risks at the same time: inflation is still too high, but the economy is still strong enough to handle today’s rates. Powell also noted that the Fed had already lowered rates by 0.75 percentage point from September through December 2025. Since then, officials have chosen to wait for clearer data. In March, the median Fed policymaker projected a 2026 year-end rate of 3.4%, a little below the current level, which suggests some easing may still come later—but not until inflation shows more convincing progress. (federalreserve.gov)
