Fed Leaves Rates Unchanged in January 2026, Market Sees March Cut

The Federal Reserve maintained its benchmark federal funds rate in the 3.5% to 3.75% range at its January 28, 2026 meeting, pausing a trend of rate cuts from the previous year. The Federal Open Market Committee (FOMC) voted to keep rates steady, though two members dissented, favoring a quarter-point cut.

Fed Chair Jerome Powell stated at his post-meeting press conference that it is "hard to look at the data and say that policy is significantly restrictive right now." He indicated decisions would be made on a meeting-by-meeting basis. J.P. Morgan strategists do not anticipate a rate cut until summer.

Looking ahead to the March 17-18 FOMC meeting, policymakers will review incoming economic data. December's Consumer Price Index (CPI) showed year-over-year inflation at 2.7%, closer to the Fed's 2% target. However, potential government shutdowns could disrupt data collection and create uncertainty.

Despite recent labor market softness, which prompted earlier rate cuts, Powell noted that economic activity remains solid and risks are improving. Most labor market weakness stems from subdued hiring, not widespread layoffs, suggesting underlying resilience. Average monthly job growth is projected at 67,000 for 2026.

J.P. Morgan strategists expect one more rate cut in 2026, aligning with consensus. However, current economic indicators make it difficult for the Fed to justify additional cuts at this juncture.