Fed Refuses to Cut, Shifts Hawkish in the Statement, with Two Dissenters
by Wolf Richter • Jan 28, 2026 • 13 Comments
“Everything comes in suggesting that this year starts off on a solid footing for growth”: Powell in the press conference.
By Wolf Richter for WOLF STREET.
The FOMC voted today to leave the Fed’s five policy rates unchanged, as widely telegraphed, despite enormous pressure by Trump to cut by a lot, after three rate cuts in a row in 2025 of 75 basis points combined, and after cutting by 100 basis points in 2024.
There were 2 dissenters of the 12 voting FOMC members, Stephen Miran and Christopher Waller, who wanted a 25-basis point cut. Waller also wanted to be Fed chair. These dissents that have been piling up at recent meetings are a breath of fresh air.
The statement, in a hawkish turn, shifted away from worries about the economy and the labor market, sees the economic growth now as “solid,” up from “moderate” at the December meeting, and undid the “shift in the balance of risks” at the December meeting where it had begun to seriously worry about the labor market. That’s no longer the case.
At the press conference, Powell added: “If you look at the incoming data since the last meeting, … everything comes in suggesting that this year starts off on a solid footing for growth.”
The FOMC left its five policy rates unchanged today:
- Target range for the federal funds rate: 3.5%-3.75%.
- Interest it pays the banks on reserve balances (IORB): 3.65%.
- Interest it pays on overnight Reverse Repos (ON RRPs): 3.50%
- Interest it charges on overnight Repos at its Standing Repo Facility (SRF): 3.75%.
- Interest it charges banks to borrow at the “Discount Window” at 3.75%.
Major changes in the statement:
The statement shifted away from worries about the economy and labor market in several places:
New: “The Committee is attentive to the risks to both sides of its dual mandate” (deleted the reference to rising “downside risks to employment”).
Old: “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.”
New: “In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent.” Deleted “in light of the shift in the balance of risks….”
Old: “In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3 3/4 percent.”
Deleted the entire paragraph from the December statement: “The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis.” This has already been implemented.
This was a no-dot-plot meeting – one of the four a year when the FOMC does not release a “Summary of Economic Projections,” which includes the “dot plot” that indicates how each FOMC member that day sees the development of future policy rates, inflation, GDP growth, and unemployment. The FOMC will release the next Summary of Economic Projections at the December meeting.
The whole statement:
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 Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Beth M. Hammack; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Anna Paulson. Voting against this action were Stephen I. Miran and Christopher J. Waller, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting |
