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- The Federal Reserve's Federal Open market Committee (FOMC) announced on January 31, 2026, that it will maintain the federal funds rate in a target range of 5.25% -...
- The Federal Reserve began raising interest rates in March 2022, increasing the federal funds rate by 0.25 percentage points at each of its frist eight meetings.
- The decision to hold rates steady reflects a moderation in inflation and continued strength in the labor market.
Federal Reserve Holds Steady on Interest Rates in January 2026
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The Federal Reserve’s Federal Open market Committee (FOMC) announced on January 31, 2026, that it will maintain the federal funds rate in a target range of 5.25% - 5.50%. This decision marks the seventh consecutive meeting where the committee has held rates steady, signaling a pause in its aggressive tightening cycle initiated in March 2022 to combat high inflation.
Background and Context
The Federal Reserve began raising interest rates in March 2022, increasing the federal funds rate by 0.25 percentage points at each of its frist eight meetings. This aggressive policy was a response to inflation reaching a 40-year high of 9.1% in June 2022, as measured by the Consumer Price Index (CPI). By july 2023, the federal funds rate had risen to a range of 5.25%-5.50%, where it has remained since. The FOMC’s dual mandate is to promote maximum employment and stable prices.
Recent Economic Data and FOMC Statement
The decision to hold rates steady reflects a moderation in inflation and continued strength in the labor market. The CPI rose 3.1% year-over-year in January 2026, according to the Bureau of Labor Statistics, down from its peak in 2022. The unemployment rate remained at 3.7% in January 2026, indicating a resilient labor market.
“The Committee remains highly attentive to inflation risks,” the FOMC stated in its post-meeting proclamation. “It will continue to assess additional data and its implications for monetary policy. The Committee is prepared to adjust the stance of monetary policy as appropriate.”
Future Outlook
While the FOMC has paused rate hikes, it has not ruled out future increases. Market participants are currently pricing in a roughly 60% probability of a rate cut by the June 2026 FOMC meeting, according to CME Group’s FedWatch tool. The timing and extent of any future rate cuts will depend on incoming economic data,especially inflation and employment figures. The next FOMC meeting is scheduled for March 19-20, 2026.