All odds are on the Federal Reserve keeping interest rates unchanged when U.S. central bankers convene in Washington, D.C., next week for their first policy meeting of 2026.

They will gather under existential auspices, with the chair of the Federal Reserve, Jerome Powell, under criminal investigation by the U.S. Department of Justice for congressional testimony about cost overruns in an ongoing renovation of the Fed’s headquarters.

Meanwhile, the Supreme Court questioned federal prosecutors and attorneys for Fed Governor Lisa Cook on Wednesday amid the Trump administration’s ongoing efforts to fire Cook over unproven allegations of mortgage fraud, raising questions about the limitations, if any, on presidential removal authority over central bank policymakers.

With even greater potential to move markets than the Fed’s next meeting, Treasury Secretary Scott Bessent said during an interview with CNBC on Tuesday that a nominee to replace Powell as Fed chair when his term expires in May could be announced as soon as next week.

The high drama of these developments has the potential to obscure the objective of policymakers when they decide next week to raise, lower or leave the federal funds rate unchanged from its current range between 3.5% and 3.75%. Those policymakers have a dual mandate to maximize employment and maintain stable prices and are famously data dependent in their decision-making process.

Though the yield curve on Fed independence is steepening, and President Donald Trump has aggressively pushed for a lowering of the fed funds rate to below 2%, the latest economic indicators suggest that no change to that benchmark borrowing rate is the likeliest outcome next week. Powell foreshadowed a potential pause after December’s rate-cut decision, and a slew of Fed officials have appeared to support that strategy in recent public remarks.

Major Wall Street firms have also recently revised their interest rate forecasts for 2026, with many predicting the first rate cut of the year won’t occur until March or June. J.P. Morgan Global Research’s latest outlook sees the Fed holding rates steady for the entire year before raising rates during the third quarter of 2027.

Fed’s preferred inflation gauge well above target

Published on delay because of the federal government shutdown, the personal consumption expenditures (PCE) price index rose 0.2% on a monthly basis in both October and November, according to Bureau of Economic Analysis (BEA) data released Thursday, which noted that the increase occurred in both goods and services.

The reading is in line with the 0.2% monthly growth that economists polled by FactSet had projected. The 2.7% annual rise in PCE inflation in October was followed by a 2.8% annual gain in November, also in line with economists’ expectations.

Core PCE inflation, which excludes food and energy categories, rose in lockstep with the all-categories index.

A separate measure of inflation, the consumer price index, arrived cooler than expected in November at 2.6% annual growth, followed by 2.7% annual growth in December. These trends portray stagnation but not necessarily a deterioration in the Fed’s ongoing efforts to return annual inflation to its stated 2% target.

Nearly 85% of job growth in 2025 occurred before President Donald Trump announced “Liberation Day” tariffs in April, according to tax audit and consultancy KPMG. The 584,000 jobs added to payrolls in 2025 was the weakest pace of growth since 2009, says KPMG, excluding pandemic distortions in 2020.

After jumping to 4.6% in November, the unemployment rate fell back to 4.4% in December, up from 4% at the beginning of 2025 but still low by historical standards. About 50,000 jobs were added in December, according to government figures, and private hiring showed resilience.

A separate BEA report released Thursday showed U.S. gross domestic product rose 4.4% in the third quarter, a slightly upward revision from initial estimates of 4.3% growth, further supporting the case for a rate-cut pause.