FX.co ★ Fed Pauses Rate Cuts

In its January 2026 meeting, the Federal Reserve decided to maintain the federal funds rate within the 3.5%–3.75% target range, meeting market expectations following three consecutive rate reductions last year. These cuts had driven borrowing costs to their lowest since 2022. However, there was dissent within the ranks, with Governors Stephen Miran and Christopher Waller advocating for an additional quarter-point reduction. The Fed's policymakers observed that economic activity continues at a solid pace and although job gains are low, the unemployment rate displays signs of stabilizing. Inflation persists at somewhat high levels. The central bank highlighted the ongoing uncertainties clouding the economic outlook, emphasizing its commitment to carefully evaluating incoming data, the evolving economic scenario, and risk assessments when determining the timing and magnitude of future adjustments to the federal funds rate.