Federal Reserve Interest Rate Cuts Pause: FOMC Holds Fed Rates Steady After Three Straight Cuts as Powell Signals Patience

The Federal Reserve hit pause on interest rate cuts at its first meeting of 2026, keeping the federal funds target range unchanged at 3.50% to 3.75% in the rate decision released Wednesday, January 28, 2026 at 2:00 p.m. ET. Chair Jerome Powell then used his 2:30 p.m. ET press conference to reinforce a simple message: policy is in a “wait and watch” phase, and the next move will depend on whether inflation cools further and whether the job market softens meaningfully.

For anyone searching “interest rates today” on Thursday, January 29, 2026 ET, the practical takeaway is straightforward: borrowing costs are not getting an immediate Fed-driven relief bump, and markets are now treating the timing of the next cut as a later-in-2026 question rather than an early-2026 assumption.

Fed meeting today: what the FOMC decided

The FOMC held its benchmark rate range steady at 3.50% to 3.75%. The decision was notable for two reasons beyond the headline number:

• The vote was 10 to 2, with Governors Stephen Miran and Christopher Waller dissenting in favor of a quarter-point cut. If their preferred move had prevailed, the target range would have shifted to 3.25% to 3.50%.

• The statement’s tone leaned toward cautious confidence: it described economic activity as expanding at a solid pace, said job gains have remained low while unemployment has shown signs of stabilizing, and repeated that inflation remains somewhat elevated.

The Fed also kept the “plumbing” settings that shape overnight money markets aligned with the steady stance, including the interest rate paid on reserve balances at 3.65% effective Thursday, January 29, 2026. It maintained key backstop rates at 3.75% and kept its overnight reverse repo offering rate at 3.50% with a per-counterparty cap of 160 billion dollars per day.

One underappreciated part of the decision: the Fed’s implementation directive emphasized maintaining an ample level of reserves, including ongoing purchases of Treasury bills and a reinvestment posture that rolls over Treasury principal payments and directs agency-related principal payments into Treasury bills. That is a technocratic change with real market implications because it shapes liquidity conditions even when the policy rate is unchanged.

Powell speech today: what he emphasized and what he avoided

Powell’s press conference centered on balancing risks rather than forecasting a schedule for cuts. His key themes were:

• The economy remains resilient enough that the Fed can afford to be patient.

• Risks to both inflation and employment have diminished compared with late 2025, but they have not disappeared.

• The committee wants more confirmation from incoming data before restarting cuts.

Just as important was what Powell did not do. He did not pre-commit to a specific meeting for the next cut, and he did not give markets the kind of “near-term green light” that often fuels an immediate rally in rate-cut expectations. The overall effect was to frame the pause as intentional, not temporary confusion.

Behind the headline: why the Fed paused after three cuts

Context matters. The Fed had delivered three consecutive quarter-point cuts in late 2025, shifting from restrictive policy toward something closer to neutral. A pause at this point serves multiple incentives at once:

• Credibility on inflation: holding steady signals the Fed will not cut simply because it started cutting.

• Risk management: waiting preserves flexibility if inflation stalls or re-accelerates, while still leaving room to cut later if growth cools.

• Communication discipline: a pause forces markets to focus on data dependence, not a presumed cutting path.

Stakeholders are not just traders. Households with credit-card balances and variable-rate debt want faster easing. Businesses want clearer financing conditions for hiring and investment. Banks and money-market funds care about the rate corridor and reserve conditions. And the political system has its own incentives: lower rates are popular, but the Fed is structurally designed to resist acting as a political tool.

A second-order effect is psychological. When the Fed pauses after an easing streak, investors start treating each data release as a higher-stakes referendum on whether the pause becomes a longer pause.

What we still don’t know

The rate decision answered the “what,” not the “when next.” Open questions that will drive the next few months:

• Will inflation resume a clean downtrend, or stay sticky enough to justify holding rates higher for longer?

• Will low job gains remain orderly, or tip into a sharper slowdown that forces cuts sooner?

• How deep is the internal split highlighted by the two dissents, and does it widen if data weakens?

What happens next: 5 realistic scenarios and triggers

• Cuts restart in mid-2026
  Trigger: clearer progress on inflation plus signs of softening in labor demand.

• A longer pause stretches into late 2026
  Trigger: inflation stays uncomfortably above target while growth remains solid.

• One cut, then another pause
  Trigger: mixed data pushes the Fed into “insurance cuts” rather than a steady easing cycle.

• Volatile markets around each Fed communication
  Trigger: investors repeatedly reprice the next cut as each major inflation or jobs report hits.

• Balance-sheet mechanics become a bigger story
  Trigger: liquidity conditions tighten or loosen faster than expected, shifting attention from the policy rate to market functioning.

Why it matters now: the Fed is telling consumers and markets that the easy part of the easing cycle is over. Rate cuts from here are not a calendar event; they’re a proof event.