Fed rate decision January 2026:

The Federal Reserve on Wednesday voted to take a break from a recent run of interest rate cuts, as the central bank navigates questions about its independence and awaits a new leader.

Meeting market expectations, the central bank’s Federal Open Market Committee voted to keep its key interest rate in a range between 3.5%-3.75%. The decision put a halt to three consecutive quarter percentage point reductions, billed as maintenance moves to guard against potential downturns in the labor market.

In voting to hold the line, the committee also upped its assessment of economic growth. It also eased its concerns about the labor market as compared to inflation.

“Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization,” the post-meeting statement said. “Inflation remains somewhat elevated.” 

Importantly, the statement also erased a clause indicating that the committee saw a higher risk to a weakening labor market than heightened inflation. That would argue for a more patient approach to policy as officials see the Fed’s dual goals of low inflation and full employment more in balance.

There was little in the way of guidance about what’s coming next, with markets expecting the Fed to wait until at least June before adjusting its benchmark rate again.

“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement said, repeating language inserted in December that markets saw as a shift away from the easing cycle that began in September 2025.

As has been the case for recent meetings, there were dissents.

Governors Stephen Miran and Christopher Waller voted against the hold, with both advocating another quarter-point cut. Both were appointed by President Donald Trump, with Miran filing an unexpired board seat in September 2025 and Waller appointed during Trump’s first term. Miran’s term expires Saturday, while Waller interviewed for the Fed chair’s job but is considered a longshot.

The routine nature of the decision comes at a time when nothing is routine for the central bank.

Chair Jerome Powell has just two more meetings before his term at the helm ends, ending a tumultuous eight years at the Fed that has included a global pandemic, a steep recession and a seemingly endless series of battles against Trump.

Most recently, the Justice Department has subpoenaed Powell over the extensive renovations at the Fed’s headquarters in Washington, D.C. Prior to that, the president threatened on multiple occasions to fire Powell and in fact has moved to sack Governor Lisa Cook, a case that is now pending a decision from the U.S. Supreme Court.

Underscoring all of the tension has been a battle over the Fed’s independence, or its ability to operate without political interference. In confirming the…