KEY POINTS
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The Federal Reserve leaves rates unchanged in its first 2026 meeting, holding the federal funds rate at 3.5%–3.75% after three cuts late last year.
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Officials signal a cautious, data-dependent stance as inflation cools but remains above the 2% target, while the labor market shows signs of stabilization.
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The Fed emphasized its commitment to maximum employment and returning inflation to its 2% objective, citing elevated uncertainty in the economic outlook.
Federal Reserve Holds Rates Steady at 3.5% to 3.75%
The Federal Reserve left its benchmark interest rate unchanged at a target range of 3.5% to 3.75% on January 28, 2026, extending a pause that began after its December 2025 meeting.
Following the two-day scheduled meeting of the Federal Open Market Committee (FOMC), the statement indicated that policymakers are taking a cautious, data-driven approach to monetary policy as they assess the evolving economic landscape.
The decision reflects the Fed’s dual mandate of achieving maximum employment and maintaining inflation at 2% over the longer run. While inflation has retreated from its peak, it remains somewhat elevated, and uncertainty about the economic outlook persists.
Rates Left Unchanged in First 2026 Meeting
Policymakers opted to keep the federal funds rate on hold as they weighed still-elevated inflation against a labor market that has shown signs of stabilization. The decision, widely anticipated by markets, keeps borrowing costs at their lowest level since 2022 but marks a shift from the steady easing seen through late 2025.
The move suggests a central bank content to wait for more data before deciding whether to deliver additional cuts later this year. The FOMC emphasized that it will carefully assess incoming data, the evolving outlook, and the balance of risks in determining the extent and timing of any future adjustments to the target range.
Rate Moves in the Last 12 Months
Over the past year, the Fed has shifted from a restrictive stance to a more neutral one as inflation cooled and growth slowed.
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December 2025: Cut the federal funds rate by 25 basis points to 3.5%–3.75%, the third reduction of the year and the lowest level since 2022.
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October 2025: Delivered a 25 basis point cut, continuing a nascent rate cut cycle as the economy showed signs of cooling.
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September 2025: Implemented the first rate cut of 2025, trimming the target range by 25 basis points after holding rates higher for much of the year.
These three moves together reduced the target range from roughly the mid-4% area earlier in 2025 to the current 3.5%–3.75% band.
FOMC projections released in December 2025 indicated that officials expected at most one additional cut in 2026, underlining a cautious stance even as markets had priced in a faster easing cycle.
Looking Ahead
The next scheduled meeting of the FOMC is set for March 17–18, 2026, where officials will reassess the economic landscape and determine whether further adjustments to the federal funds rate are warranted.
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