The Federal Reserve held its federal funds rate steady at 3.50–3.75% at the January 28, 2026 FOMC meeting, meaning the market question of whether a rate cut would occur between December 16, 2025 and the conclusion of that January meeting resolves to **No**. The FOMC voted to pause its rate-cutting cycle, with Chair Powell citing solid economic footing and improved U.S. growth prospects since December, while acknowledging that inflation and employment risks had diminished. The sole dissent came from Governor Christopher Waller, who argued the committee should have cut rates by 25 basis points — underscoring that the hold was a deliberate majority decision rather than a unanimous one.
The backdrop to the January hold was a mix of persistent inflation and resilient labor market data that gave the committee reason for caution. The Fed's preferred inflation gauge, the PCE price index, rose 2.9% year-over-year in December, well above the 2% target. Meanwhile, the U.S. economy added 130,000 non-farm payroll jobs in January, and unemployment fell to 4.3%, reducing the urgency for near-term easing. A Fed study released February 12 also found that roughly 90% of U.S. tariff costs fall on American consumers, adding an inflationary wrinkle to the policy calculus.
Political pressure on the Fed intensified following the hold. President Trump publicly called Powell an "idiot" and demanded sharp rate cuts, while the Treasury Department accused the Fed of losing public trust over the inflation surge. Despite this pressure, Powell has maintained the Fed's institutional independence, and minutes from the January meeting — released in mid-February — revealed that some officials even raised the possibility of rate increases, reflecting the breadth of internal disagreement. Governor Miran offered a contrasting view, forecasting four 25-basis-point cuts across 2026 and arguing current policy is tighter than understood, but his outlook remains an outlier within the committee.
Looking ahead to the March 17–18 FOMC meeting, multiple officials — including Governors Barr and Waller and regional presidents Goolsbee, Logan, and Daly — signaled in late February that rates are likely to remain on hold for some time. A below-expectations January CPI reading of 2.4% has kept the door open to cuts later in the year, but the combination of sticky PCE inflation, a strong labor market, and tariff-related price pressures leaves the Fed's next move deeply uncertain. The key unresolved question is whether softening growth data — Q4 GDP came in at just 1.4%, well below the 2.5% forecast — will eventually tip the balance toward easing.