Federal Reserve Holds Interest Rates Steady Amidst 'Solid' Economic Growth

Federal Reserve Maintains Key Interest Rate

The Federal Reserve announced on January 28, 2026, its decision to keep the target range for the federal funds rate unchanged at 3.5% to 3.75%. This marks the first monetary policy decision of the year by the Federal Open Market Committee (FOMC). The move follows a series of three rate cuts initiated by the Fed in 2025.

The decision was reached with a 10-2 vote, indicating broad consensus among the committee members. Governors Stephen I. Miran and Christopher J. Waller dissented, advocating for a 25 basis point reduction in the federal funds rate.

Economic Assessment and Inflation Outlook

In its accompanying statement, the FOMC characterized the current state of the U.S. economy, noting that 'economic activity has been expanding at a solid pace'. The committee observed that 'job gains have remained low, and the unemployment rate has shown some signs of stabilization'. Despite these positive indicators, inflation 'remains somewhat elevated'. The FOMC reiterated its commitment to its dual mandate of achieving maximum employment and price stability, acknowledging that 'uncertainty about the economic outlook remains elevated' and that it is attentive to risks on both sides of this mandate.

Reaffirmation of Longer-Run Goals and Monetary Policy Strategy

Alongside the monetary policy decision, the Federal Reserve also reaffirmed its Statement on Longer-Run Goals and Monetary Policy Strategy. This foundational document outlines the FOMC's framework for achieving its statutory mandate from Congress, which includes promoting maximum employment, stable prices, and moderate long-term interest rates. The statement emphasizes the committee's objective of achieving 2 percent inflation over the longer run, as measured by the annual change in the price index for personal consumption expenditures. The document, last revised in 2025, serves to enhance transparency and guide the public's understanding of the Fed's policy actions.

Details from the Implementation Note

The Implementation Note, also released on January 28, 2026, provided operational details regarding the Federal Reserve's tools for implementing monetary policy. Effective January 29, 2026, the interest rate paid on reserve balances was set at 3.65 percent. The note specified that standing overnight repurchase agreement operations would be conducted at a rate of 3.75 percent, while standing overnight reverse repurchase agreement operations would have an offering rate of 3.5 percent, with a per-counterparty limit of $160 billion per day. Furthermore, the Federal Reserve will continue to increase its System Open Market Account holdings through purchases of Treasury bills and, if necessary, other Treasury securities with remaining maturities of three years or less, to maintain an ample level of reserves.