Federal Reserve Holds Interest Rates Steady
- The United States Federal Reserve maintained its benchmark interest rate at 3.5 to 3.75 percent on Wednesday,January 22,2026,resisting calls from President Donald Trump for more significant cuts.
- The Federal Open market Committee (FOMC) stated its dual mandate remains achieving maximum employment and a 2 percent inflation rate over time.
- This outcome was widely anticipated by financial markets.
Federal Reserve holds Interest rates Steady in January 2026
The United States Federal Reserve maintained its benchmark interest rate at 3.5 to 3.75 percent on Wednesday,January 22,2026,resisting calls from President Donald Trump for more significant cuts. The decision marks the frist monetary policy action of the year.
The Federal Open market Committee (FOMC) stated its dual mandate remains achieving maximum employment and a 2 percent inflation rate over time. The FOMC acknowledged “uncertainty about the economic outlook remains elevated” in its official release.
This outcome was widely anticipated by financial markets. CME FedWatch,a tool tracking monetary policy expectations,indicated a greater than 97 percent probability of the Fed holding rates steady prior to the announcement.
Labor Market and Economic Indicators
The central bank noted that economic activity continues to expand at a solid pace. However, job growth has slowed. The U.S.economy added 584,000 jobs in 2025, the lowest annual increase since 2003, according to the Bureau of Labor Statistics.
- October 2025: Payrolls increased by 64,000 jobs.
- December 2025: Payrolls increased by 50,000 jobs, a rebound from October’s figures.
- October 2025 (revised): The economy lost 105,000 jobs.
Several major companies have announced significant layoffs. Amazon and UPS, such as, have collectively announced tens of thousands of job cuts, partially attributed to increased adoption of artificial intelligence.
Potential Economic headwinds
A potential government shutdown, which could begin as early as Saturday, January 25, 2026, also poses a risk to the U.S. economy and labor market. The potential duration of a shutdown remains uncertain.
CME FedWatch currently projects two rate cuts in 2026, with June identified as the earliest likely timeframe for the first reduction.
“Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization.” – Federal Open Market Committee, January 22, 2026