By Chuck Mikolajczak
NEW YORK, Jan 28 (Reuters) – The Federal Reserve held interest rates steady on Wednesday, as was widely expected, citing still-elevated inflation alongside solid economic growth, and giving little indication in its latest policy statement of when borrowing costs might fall again.
MARKET REACTION:
STOCKS: The S&P 500 held near the unchanged mark and was last up 0.08%
BONDS: The yield on benchmark U.S. 10-year notes added to gains and before paring slightly was up 2.6 basis points to 4.251%
FOREX: The dollar index pared gains and was last up 0.57% to 96.45.
COMMENTS:
TIM HOLLAND, CHIEF INVESTMENT OFFICER, ORION, OMAHA, NE
“The Fed, after three consecutive quarter point rate cuts in late 2025, stood pat at its January meeting, keeping the Fed Funds Rate between 3.5% and 3.75%. The Fed telegraphed a cut was not in the offing, and the market didn’t expect one, so this month’s meeting was a non-event, which is a good thing as when markets and the Fed aren’t on the same page extreme volatility often manifests.
“If there are key takeaways for us, it is the Fed’s more optimistic tone on the economy; the belief any inflation impact from tariffs has mostly made its way through the economy and just two voting members dissenting from the Fed’s decision to hold rates steady, voting instead for a quarter point cut. Given all the uncertainty around the Fed of late – the DOJ investigation, the coming departure of Jay Powell as Chair, the Supreme Court deciding if Governor Cook can be removed by President Trump – we think near unanimity on the policy front is a good thing (and we found it notable Mr. Powell didn’t address the DOJ investigation or respond to criticism of him attending the Supreme Court hearing on Governor Cook).
“Our two cents is that the economy is doing okay, but inflation is a bit sticky, and the Fed was right to stand pat in January. Finally, we would be very surprised if we get another rate cut with Mr. Powell at the helm of the world’s most important central bank.”
CHRIS GRISANTI, CHIEF MARKET STRATEGIST AT MAI CAPITAL MANAGEMENT IN NEW YORK, NY
“Today’s Fed statement and press conference was decidedly on the hawkish side. Economic activity was reclassified from ‘moderate’ to ‘solid,’ and the Fed removed language about downside risk to employment.
“In the press conference, Powell said that the employment situation had ‘stabilized,’ after a period of softness last year. While inflation has stabilized, it remains ‘somewhat elevated.’
“Putting all this together, inflation rather than unemployment is now on the top of the list of Fed concerns. I don’t see a rate cut any time soon. Further, with the market strong and the economy strengthening, I think there may be no cuts in 2026, and that is hawkish versus current expectations.”
UTO SHINOHARA, SENIOR INVESTMENT STRATEGIST, MESIROW CURRENCY MANAGEMENT, CHICAGO
“The dollar’s reaction to the Fed rate announcement was relatively muted, with policy held steady as widely expected. The 10-2 vote was unsurprising, with Miran and Waller dissenting in favor of a cut, leaving the broader committee comfortable maintaining a wait-and-see stance. Signs of labor market stabilization have reduced the urgency to ease, and with the dollar already rebounding earlier in the session following yesterday’s Trump-induced pullback, the announcement itself did little to move the dollar from pre-decision levels.
“The market continues to price nearly two rate cuts in 2026, with the first most likely in June. As the Fed remains in an easing cycle while most other major central banks are on hold or retain a tightening bias, this divergence leaves the dollar more vulnerable relative to its peers. That vulnerability has been amplified by a fragile market backdrop, heightening sensitivity to dollar moves amid ongoing geopolitical and policy uncertainty, including Greenland and Euro-area tariff concerns, renewed talk of Yen intervention, weaker consumer confidence, and broader unease tied to unrest in Minneapolis as well as an increased military presence in the Gulf region.”
JUAN PEREZ, DIRECTOR OF TRADING, MONEX USA, WASHINGTON
“With the uncertainty surrounding markets, it makes sense for the Fed as a crucial financial authority to use caution and hold from changing interest rates. You still have a lack of consensus amongst voting members, so it ultimately helps in easing the U.S. dollar pain experienced since January 20th. We think the Fed’s path will remain quite unpredictable as we also expect some pushback to the news.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“The real action will be in the press conference, or if President Trump tries to steal their thunder by saying who his new Chair pick is and that he would have gotten the job done in cutting rates.
“Waller’s chance of being the next Chair just went up with his dissent. Miran joined forces with him to advocate for a 25 bps cut. What has changed since December to move Miran to favor only a modest cut?
“The weaker dollar can affect the Fed’s view of imported inflation, but it’s on the same scale as tariffs. A weaker dollar is a less disruptive means to the same end that Trump has been pushing for: favor US exporters at the expense of importers. This is just another headwind to getting to 2%, but it’s more like a gentle breeze than an outright gale.”
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO:
“The Fed did nothing and did it with conviction. In voting along 10-2 lines and subtly upgrading its assessment of labor market conditions, the central bank clearly telegraphed a desire to stay on the sidelines for now. Expectations for near-term easing are likely to be disappointed.“
RYAN DETRICK, CHIEF MARKET STRATEGIST, CARSON GROUP, OMAHA
“The Fed didn’t rock the boat. It was widely expected that they’d be on pause. The reality is we probably don’t see any cuts until Powell is out of the Fed sometime after May.
“The potential good news, they did cite some positives on the labor market front, but clearly inflation is a worry. Just look at the soaring commodity prices we’ve been seeing recently.
“(Stephen) Miran, we know he’s in there to shake things up a little. This is what he’s been doing. But (Christopher) Waller’s somewhat interesting. His name is still in the hat, potentially to be the next Fed chairperson. So I’m sure he’s also trying to get the president’s attention by pointing out he is still firmly in the dovish camp, even with the somewhat worrisome inflation.
“Fed independence is a very real concern. We all know that the next Fed chairperson will be pressured substantially to cut interest rates going forward. But if the data suggests otherwise, we all hope that they will do what’s right and not be pressured into policy that might not be the best situation for the economy.”
MATTHIAS SCHEIBER, HEAD OF THE MULTI-ASSET TEAM, ALLSPRING GLOBAL INVESTMENTS, LONDON:
“A steadier job market and sticky inflation made the Fed wait to see how previous rate cuts will support U.S. economic growth. The current rate level seems to be within reach of the ‘neutral rate,’ which shores up employment while keeping inflation in check. That said, the investment and capital spending boom caused by artificial intelligence and the sharp rise of commodity prices, including industrial metals, might result in a stickier inflation path for this year.
“The market has slowly priced out one of the two rate cuts expected at the end of last year. The big focus will remain on the announcement of the new Fed chair, with the race wide open, though a general expectation of someone more dovish to succeed Jerome Powell. Governmental pressure on the Fed to cut interest rates will remain a continued theme this year.”
KYLE CHAPMAN, FX MARKETS ANALYST, BALLINGER GROUP, LONDON:
“Few surprises here. What the market will be glad to see here is that there is no sign of bowing down to Trump from core of the committee. They are standing firm.
“The dissents came from the usual suspects, and for the rest, there seems to be little worry at all that the US labor market is going to be in need of rescue any time soon. The rate path this year is wide open here, but I don’t see any reason to cut until at least the summer. The economy looks solid, equities are soaring, inflation is sticking around that 2.5-3.0% range – why ease further now?”
(Compiled by the Global Finance & Markets Breaking News team)
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