The Federal Reserve announced on January 28 that it will keep the federal funds target range at 3.50%–3.75%, a decision that aligned with market expectations and reflected continued caution among policymakers. The minutes of the Federal Open Market Committee meeting noted that while some labor-market indicators have softened, unemployment shows signs of stabilizing and inflation remains elevated.
Committee members emphasized the central bank’s commitment to its dual mandate of maximum employment and 2% long‑run inflation, but the minutes stressed that the outlook remains highly uncertain. Officials said they will closely monitor risks to both objectives as they assess the lagged effects of past policy moves and incoming data.
The vote was 10–2 in favor of holding rates. Two dissenters — including Governor Christopher Waller — preferred an immediate 25‑basis‑point cut, underscoring a division within the committee about the appropriate pace of easing. That split highlights a subtle but important shift: some policymakers are ready to press on rates to support growth, while the majority remains wary of reversing policy too quickly as inflation pressures persist.
Markets had largely priced in a pause; the Fed had already reduced rates three times in the second half of 2025. The decision to stand pat suggests officials want time to assess whether those cuts are feeding through to inflation and employment, and whether additional easing is warranted without risking a renewed pickup in prices.
For global markets, the Fed’s pause keeps the short‑end of the US yield curve anchored at higher levels than in recent years, cushioning the dollar and shaping capital flows. Emerging markets and commodity exporters will watch US data closely: any signal of further easing would likely ease pressure on their currencies and borrowing costs, whereas persistent US inflation could keep pressure on central banks elsewhere to maintain tighter stances.
Looking ahead, the Fed will be driven by incoming monthly readings — notably payrolls and core inflation measures — and by whether the recent easing cycle produces the hoped-for slowdown in inflation. The minutes convey a posture of conditional patience: more cuts remain possible, but only if clear evidence of disinflation and a softening labor market materializes.