Washington. DC - The US Federal Reserve is widely expected to keep interest rates unchanged when it meets in the coming week, holding firm despite President Donald Trump's pressure to slash levels as it guards against threats to its independence.

The central bank has cut rates three consecutive times since September as the jobs market weakened, bringing them to a range between 3.50% and 3.75%.

But Fed Chair Jerome Powell has signaled the bar would be higher for a further reduction in January. They meet on Tuesday and Wednesday.

"The fact that growth is strong, unemployment is low, equity markets are close to all-time highs and inflation is above target all argue for a pause," said analysts at ING Bank.

Powell's robust defense of Fed independence in response to ongoing pressure from Trump to lower rates confirms this, ING added.

On January 11, Powell released a rare, solemn statement revealing that the Department of Justice was investigating him over a $2.5 billion renovation of the bank's headquarters.

He slammed the threat of criminal charges as the result of policymakers setting rates in the public's best interests – rather than bowing to the president's wishes.

Trump has made no secret of his disdain for Powell, claiming there is "no inflation" and repeatedly questioning the Fed chair's competence and integrity.

Yet, US inflation has been well above the bank's 2% target for over five years, said former Cleveland Fed president Loretta Mester. Price increases could cool after Trump's trade tariffs filter through the world's biggest economy, but Mester flagged the need for "more convincing evidence."

Meanwhile, existing cost hikes have brought about a "large wedge" between how affluent and lower-income households view the economy, said KPMG chief economist Diane Swonk.

Even if the gap could temporarily narrow as fiscal stimulus hits in early 2026 – with a rise in tax refunds incoming due to tax cut expansions – this could "cause a more entrenched bout of inflation," she warned.

Another complication is stagnating employment, forcing policymakers to walk a tightrope between lowering rates to boost the economy and keeping them higher to curb inflation.