Federal Reserve makes its call at the year’s second meeting
Faced with new pressure on both sides of its mandate, the Federal Reserve decided Wednesday to hold rates steady for a second straight meeting to open 2026.
The central bank’s Federal Open Market Committee (FOMC) concluded its meeting by announcing it would hold the federal funds rate steady between 3.50% and 3.75%.
LIVE: Follow along with our live blog for the latest news on Fed decision day
After three straight 25-basis-point rate cuts to end 2025, the central bank decided to keep rates steady again, due in large part to new pressures on both the “full employment” and “steady prices” sides of its dual mandate.
In fact, due to those increasing pressures, it is anticipated that Fed chair Jerome Powell may address the growing concern of stagflation when he speaks to the media at 2:30 p.m. ET.
Both economists and betting markets viewed this rate as certain, even before geopolitical turmoil and rising tech layoffs. Sam Williamson, senior economist at First American, told Mortgage Professional America that a hold was the most likely path.
“Underlying conditions look little changed since the FOMC last met in January, with inflation still above the Fed’s target and the labor market softer, but not weak enough to force immediate action,” Williamson said. “Recent geopolitical events add another layer of uncertainty, particularly through energy prices, but not yet enough to alter the policy picture. That combination is likely to keep the Fed in wait-and-see mode until there is clearer evidence that inflation is moving sustainably lower.”
Pressure on the mandates
Things seemed to be calming down on both sides of the Fed’s mandate early in 2026. However, a wave of AI-related layoffs has begun to put pressure on the jobs mandate. Then, the Iran War drove oil prices up, which eventually will show up in inflation numbers.
“The Fed is dealing with a lack of progress rather than a clear deterioration, with elevated risks on both sides of its mandate,” Williamson said. “If one side looks slightly more pressing in the near term, it is still inflation, with the Fed’s preferred gauge of core inflation still running above 3% year-over-year and recent global events adding further uncertainty to the outlook.
“Labor-market data have been uneven to start the year, with January’s gains tempered by February’s losses, but on balance they still point to a job market that remains soft without a clear break lower. In that environment, policymakers are likely to stay cautious as they wait for clearer signals from the data.”
Pressure from the White House
There will likely be more backlash from the White House regarding Wednesday’s decision to hold rates.
Wednesday morning, President Donald Trump took to Truth Social again to ask when the Fed was going to cut rates again.
“When is “Too Late” Powell lower INTEREST RATES?” Trump said in a post. Last week, he said Powell, “should be dropping interest rates, IMMEDIATELY.”
Observers will be watching Powell’s comments closely to see if he offers any thoughts about when the central bank will cut rates again. Many betting markets are leaning toward only one rate cut in 2026.
Williamson said that if some of the current pressures ease, he sees a cut in the second half of the year as more likely.
“The second half of 2026 looks more plausible than a near-term move,” Williamson said. “For now, policymakers are still waiting for clearer signals from the data while navigating tariff-related inflation effects and newly elevated uncertainty around energy prices.
“If those pressures fade, the backdrop could become more supportive of easing later in the year. That timeline could move forward if growth slows more than expected, labor-market conditions weaken materially, or inflation shows clearer signs of cooling.”
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