The US Federal Reserve policymakers made a near-unanimous decision to keep interest rates unchanged at their meeting in January, with policymakers striking a cautiously hawkish tone even as they signaled flexibility on future moves, according to the minutes of the latest Federal Open Market Committee (FOMC) meeting released on Wednesday.
While the decision to hold rates steady was widely expected, the minutes showed that officials remain divided on the path ahead, with some open to further easing if inflation cools as anticipated, and others prepared to tighten policy should price pressures persist.
Here are five key takeaways from the January 27–28 FOMC meeting:
Policy Decision
The FOMC voted 10–2 to maintain the federal funds rate in the 3.50%–3.75% range, following three rate cuts in 2025. The decision reflected continued economic resilience alongside lingering inflation risks.
Governors Stephen Miran and Christopher Waller dissented in favor of a 25-basis-point rate cut. Some other participants indicated they would consider additional easing if inflation trends lower in line with their expectations.
Door Open for Rate Hikes
The minutes suggest that policymakers are keeping the option of rate hikes on the table.
“Several participants indicated that they would have supported a two-sided description of the committee’s future interest-rate decisions, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels,” the minutes noted.
The US central bank has been battling to bring inflation down to its long-term two-percent target since the pandemic, with prices remaining persistently high.
Inflation Risks Remain Elevated
A “vast majority” of participants judged that downside risks to employment had moderated in recent months, while the risk of persistent inflation remained meaningful.
Most policymakers cautioned that progress toward the 2% inflation objective could be slower and more uneven than previously expected. They emphasized that inflation running persistently above target remains a key concern.
Labour Market Stabilising
Participants broadly assessed that labor market conditions have begun to stabilize, with downside risks diminishing. With appropriately calibrated monetary policy, officials expect the labor market to remain stable and potentially improve over the course of the year.
Growth Outlook and AI Uncertainty
Economic activity was described as expanding at a solid pace, with officials broadly expecting growth to remain steady into 2026.
However, the discussion also highlighted emerging structural uncertainties, including the transformative impact of artificial intelligence. Policymakers acknowledged AI’s significant potential but also noted the risks and unpredictability associated with rapid technological disruption.
The Fed’s next policy meeting is scheduled for March 17–18, when officials will release updated economic projections and interest rate guidance.
