Fed Holds Rates Steady at 3.5%-3.75%, Two Governors Dissent

Fed Holds Rates Steady at 3.5%-3.75%, Two Governors Dissent

The Federal Reserve held interest rates steady at 3.5%-3.75% on January 28, ending a streak of three consecutive cuts. Two Trump-appointed governors dissented, voting for another quarter-point reduction.

The Decision

The FOMC voted to pause rate cuts after three consecutive quarter-point reductions. The statement noted the economy is "expanding at a solid pace" while "inflation remains somewhat elevated." Economic data showing a slowdown in the labor market combined with sticky inflation prompted the hold.

The Dissenters

Governors Stephen Miran and Christopher Waller voted against the decision, advocating for another quarter-point cut. This marked Miran's fourth consecutive dissent. Both officials were appointed by President Trump, highlighting internal Fed tensions over the pace of policy normalization.

Powell on Tariffs

Chair Powell addressed the tariff situation directly: "Most of the overrun in goods prices is from tariffs. We do think tariffs are likely to move through and be a one-time price increase." He expects tariff-driven inflation to peak then decline through 2026.

Market Reaction

• Treasury yields moved higher following the decision
• S&P 500 hovered just below 7,000
• Futures pricing: Max 2 rate cuts in 2026, none in 2027
• Next expected move: June 2026 cut most likely

Leadership Transition

Powell has just two more FOMC meetings before his term ends in May. The timing creates uncertainty -- markets must now assess how a new Fed chair (likely Kevin Warsh) might shift policy direction.

What Traders Should Watch

• March FOMC meeting (March 18-19) -- last full Powell meeting
• PCE inflation data -- Fed's preferred inflation gauge
• Labor market reports -- key to rate cut timing
• Warsh confirmation hearings for policy hints

Sources: CNBC, Federal Reserve

TGIF! Have a good weekend!

-- Fi
"The Fed's job is to take away the punch bowl just as the party gets going -- but this time, they're not sure if the party's still on."