Federal Reserve Holds Interest Rates Steady at 3.50%-3.75% in First 2026 Meeting

Federal Reserve Pauses Rate Adjustments

The Federal Reserve, the central bank of the United States, announced on January 28, 2026, its decision to keep the benchmark federal funds rate unchanged. The Federal Open Market Committee (FOMC) voted to maintain the target range at 3.50%–3.75%, marking the first pause in rate adjustments after three consecutive cuts in the latter half of 2025.

This move aligns with expectations from Wall Street economists and positions the rate at its lowest level since November 2022. The decision was made amidst ongoing economic considerations and significant political pressure.

Economic Assessment and Outlook

In its official statement, the FOMC provided an assessment of the current economic landscape. Key observations included:

• Economic activity has been expanding at a solid pace.
• Job gains have remained low, with the unemployment rate showing signs of stabilization.
• Inflation remains somewhat elevated, exceeding the central bank's long-term target of 2%.

Federal Reserve Chair Jerome Powell, whose term is set to expire in May, stated that the U.S. economy is 'coming into 2026 on a firm footing' and that the current interest rate stance is 'appropriate to promote progress toward both of the Fed's goals' of maximum employment and price stability.

Committee Vote and Dissent

The vote to hold rates steady was not unanimous. While a majority of the FOMC members supported the decision, Governors Stephen Miran and Christopher Waller cast dissenting votes. Both preferred a reduction of 0.25 percentage points (25 basis points) in the federal funds rate at this meeting.

Looking ahead, the Committee emphasized its commitment to carefully assessing 'incoming data, the evolving outlook, and the balance of risks' when considering any future adjustments to monetary policy.

Political Climate and Leadership Transition

The Federal Reserve's decision comes at a time of heightened political scrutiny. The central bank has faced 'enormous pressure' from the White House to lower interest rates. President Trump has openly criticized Chair Powell and has nominated former Federal Reserve Governor Kevin Warsh as a potential successor.

Chair Powell has also recently been the subject of a federal investigation related to his congressional testimony and the renovation of Federal Reserve buildings. He has publicly stated that this investigation is a 'pretext' to undermine the Fed's independence in setting interest rates.