US Fed holds interest rates despite White House pressure

The US Federal Reserve held interest rates steady on Wednesday, as investors and economists remain focused on escalating threats to the central bank's independence.

The Fed said it will keep its key lending rate between 3.5% to 3.75% despite pressure from US President Donald Trump to cut borrowing costs.

There are signs the employment market is stabilising - job creation is sluggish but the unemployment rate has ticked lower. Policymakers are continuing to monitor the effect of three interest cuts last year on the US economy.

Trump is soon expected to announce a replacement for Fed chair Jerome Powell, whom the president has frequently criticised for not reducing interest rates quickly enough.

Two Fed officials - Stephen Miran, who is on leave from his post at the White house where he leads Trump's Council of Economic Advisers and Christopher Waller - voted in favour of a 0.25 percentage point cut.

A recent federal criminal probe intensified concern about political pressure on the Fed.

After a year of Trump's relentless attacks on Powell, whose term as chair ends in May, federal prosecutors opened a criminal investigation earlier this month over testimony he gave to a Senate committee last year about renovations to Federal Reserve buildings.

Wall Street investors are eagerly awaiting Powell's press conference following the central bank's rate decision - his first since condemning the Department of Justice (DoJ) probe.

The S&P 500 stock index fluctuated ahead of his remarks, briefly surpassing 7,000 points for the first time on Wednesday morning.

Powell previously said he believed the federal investigation stemmed from Trump's anger that the Fed had not brought interest rates down quickly enough.

Former heads of the US central bank strongly criticised the investigation, too, describing it as a bid to undermine the Fed's independence.

The president has publicly urged Powell to cut interest rates in order to reduce the US government's hefty borrowing costs and to make it easier for Americans to get mortgages and other loans.

Trump has also launched personal attacks against Powell - whom the president appointed as Fed chair during his first term in the White House - calling the central banker a "major loser" and "numbskull".

Last August, Trump said he was removing Fed governor Lisa Cook, accusing her of engaging in mortgage fraud, which she has denied. The Supreme Court is now weighing the case.

Another wild card looming over Wall Street: Trump's pick to replace Powell at the end of his term. Whoever steps into the role will inevitably face credibility concerns, as Trump's pressure on the Fed has raised questions about whether the next chair will act independently.

BlackRock executive Rick Rieder has emerged in recent days as a front-runner, though odds in prediction markets have been volatile.