Fed Holds Key Rate Steady In First Policy Meeting Of 2026 Despite Trump’s Mounting Pressure

• The Fed noted that inflation still remains somewhat elevated.
• The two main contenders to take up the job as next Fed chair Stephen I. Miran and Christopher J. Waller both voted against the policy decision.
• Both Miran and Waller preferred to lower the target range for the federal funds rate by 0.25 basis points. 
   

The Federal Reserve on Wednesday held its benchmark interest rates steady in its first policy meeting of 2026, on the back of encouraging labor market data and stabilizing unemployment rate. 

The Fed announced that it will hold key interest rates at 3.50% - 3.75%, in line with market expectations.

“Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated,” the Federal Reserve said in a statement. 

The move was widely anticipated by the markets after policymakers delivered three consecutive 25-bps rate cuts in September, October, and December 2025 amid rising inflation and growing unemployment at the time. In its latest update, the Fed noted that inflation still remains somewhat elevated.

Fed’s Rationale

Recent economic data have pointed toward a return to meaningful growth for the U.S. economy and stabilization of key economic indicators, including unemployment. 

In December, the Bureau of Economic Analysis reported that the U.S. economy grew at an annualized rate of 4.3% in the third quarter (Q3), higher than the Dow Jones forecast of 3.2%, as cited by MarketWatch. 

The December jobs report from the Bureau of Labor Statistics (BLS) showed the unemployment rate inching lower to 4.4% in December, down from a revised 4.5% in November.

Eyes On Fed Chair Nomination

The decision comes amid increased focus on the next Fed Chair nomination expected from President Donald Trump as well as the ongoing criminal investigation on current Fed Chair Jerome Powell. 

The two main contenders for the next Fed chair, Stephen I. Miran and Christopher J. Waller, both voted against the policy decision. Both Miran and Waller preferred to lower the target range for the federal funds rate by 0.25 bps at the meeting. 

Meanwhile, U.S. equities were mixed on Wednesday. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down by 0.13%, the Invesco QQQ Trust ETF (QQQ) rose 0.37%, and the SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 0.10%. 

Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘extremely bearish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was down 0.14% at the time of writing.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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