Fed Expected to Hold Rates at Jan. Meeting
Fed Expected to Hold Rates as the FOMC meets, leaving markets priced for only limited easing and keeping traders focused on Powell's press conference.
KEY TAKEAWAYS
- Markets price a near-certain hold at the FOMC with 97.2% probability.
- Fed's target range is 3.5%-3.8% and officials stress meeting-by-meeting data dependence.
- Consensus forecasts limited rate cuts in 2026, contingent on labor stabilization and inflation progress.
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The Federal Reserve is expected to keep rates steady at its two-day FOMC meeting concluding on Jan. 28, focusing markets on limited easing in 2026 and Chair Jerome Powell’s upcoming press conference, where he will defend the central bank’s independence.
Hold Expected and Market Odds
The Fed’s published schedule shows the Jan. 27–28 FOMC meeting will release a policy statement at 2:00 p.m. ET, followed by Powell’s press conference at 2:30 p.m. ET. The committee’s 12 voting members include Powell (chair), Philip Jefferson (vice chair), Michael Barr, Michelle Bowman, Lisa Cook, Stephen Miran, Christopher Waller, John Williams, Beth Hammack, Neel Kashkari, Lorie Logan, and Anna Paulson. Markets assign a 97.2% probability to holding the current federal-funds target range of 3.50%–3.75%, with only a 2.8% chance of a 25-basis-point cut.
This pause expectation follows three consecutive quarter-point reductions in the fourth quarter of 2025. Officials have emphasized a meeting-by-meeting, data-dependent approach as they evaluate the impact of those cuts.
2026 Rate Path Outlook and Political Context
Most economists forecast limited easing in 2026, with a recent survey showing consensus for two additional quarter-point cuts and none in 2027. Goldman Sachs projects reductions in June and September 2026, lowering the policy range to about 3.00%–3.25%. Some dissenting views suggest a possible rate hike late in 2026 if the labor market strengthens, while others expect policy to remain steady if inflation remains elevated.
The timing and extent of any easing depend on incoming data. Personal-consumption-expenditures inflation remains roughly 80 basis points above the Fed’s 2% target. Fourth-quarter 2025 GDP is estimated at an annualized 5.4%, while labor indicators show signs of softening with unemployment trending higher. Officials have said future moves hinge on job market stabilization and progress toward the inflation goal.
Powell faces an unusual governance backdrop that may influence his remarks. A Department of Justice investigation related to a Fed building renovation, Supreme Court litigation over the administration’s attempt to remove Governor Lisa Cook, and Powell’s term expiration on May 15, 2026, create uncertainty. The White House is expected to announce a nominee this week, with names such as Kevin Hassett, Christopher Waller, Kevin Warsh, and Rick Rieder circulating; any successor will require Senate confirmation.
Near-term fiscal risks add to the uncertainty. A federal funding deadline on Jan. 30 raises the possibility of a partial government shutdown, which could limit official data releases and force the Fed into a period of stasis. The Conference Board reported a sharp drop in U.S. consumer confidence on Jan. 27, signaling near-term demand weakness.
Markets will closely analyze the FOMC statement and Powell’s remarks for clues on the pace of easing and the committee’s voting dynamics after any leadership transition. The interaction of persistent inflation, softer hiring, and political developments will determine whether the limited easing priced into markets for 2026 materializes.
