Fed pauses after three cuts, leaving federal funds rate unchanged at 3.5%–3.75% as inflation stays above target
WASHINGTON (High Desert News Online) – The Federal Reserve’s FOMC held the federal funds rate at 3.5%–3.75% on Jan. 28, 2026, pausing after three cuts as policymakers weigh persistent inflation around 2.6% against slowing job gains and mixed economic signals and uncertainty.
Key takeaways
- FOMC vote: The committee voted 10–2 to hold rates at 3.5%–3.75%, after three 25 bp cuts in late 2025; dissenters preferred an additional 25 bp cut. three 25 basis-point cuts in September, October and December 2025 Fox Business.
- Why pause: Policymakers cited cooler job gains and inflation around 2.6% y/y, prompting a cautious, meeting-by-meeting approach. FOMC statement and CoStar analysis.
- Markets and outlook: Traders largely priced a pause; economists still model cuts later in 2026 but expect a data-dependent, “wait-and-see” stance. Market coverage and forecasts.
Key information — FOMC January 2026 and the federal funds rate unchanged
The Federal Open Market Committee voted 10–2 on Jan. 28, 2026, to leave the federal funds rate unchanged at 3.5%–3.75% after three 25 basis-point cuts in September, October and December 2025. See the Federal Reserve press release and coverage by Fox Business.
Governors Stephen Miran and Christopher Waller dissented, both preferring a 25 basis-point cut at this meeting, according to reporting by Fox Business.
Why the Fed paused: labor, inflation and divisions inside the Fed
The FOMC’s decision to keep rates steady reflects a balancing act. Recent data show the labor market is cooling: job gains have slowed and unemployment stabilized after peaking near 4.5% in November 2025. At the same time, inflation remains above the Fed’s 2% goal—about 2.6% year-over-year through December—even as overall inflation has softened since mid-2025 (Fox Business; CoStar).
Fed Chair Jerome Powell said policy is near neutral and that decisions will be made meeting-by-meeting without a preset course. He pointed to mixed signals, including tariff pass-through that briefly boosted prices and complex labor trends tied to softer demand and migration shifts.
“Policy is near neutral,” Chair Powell said, underscoring a cautious approach.
(Reporting: Fox Business.)
The split on the committee was clear: two governors preferred an immediate 25 bp cut, while the majority opted to pause and monitor incoming data (Fox Business).
What the FOMC statement said
The official statement described the economy as “expanding at a solid pace”, noted “low” job gains and characterized inflation as “somewhat elevated.” Importantly, the Fed did not signal immediate further cuts and emphasized that policymakers will evaluate new data before deciding on future moves. Read the full statement: FOMC press release.
Market reaction and forecasts
Markets largely expected a pause. CME FedWatch showed roughly an 86% probability of no change at the next meeting, signaling traders expect the Fed to hold until clearer signs of disinflation or labor weakness appear (Fox Business).
Economists still expect rate cuts later in 2026—some forecast two cuts, possibly beginning in June—but most emphasize a data-dependent, wait-and-see approach (CoStar).
The Fed’s decision does not directly lower mortgage rates. Mortgage rates are set in broader credit markets and reflect expectations for future policy, so an immediate drop in mortgage costs is unlikely despite the Fed’s earlier cuts (CoStar).
Policy calendar and what to watch next
The FOMC’s 2026 meeting schedule provides windows when the Fed may act again: March 17–18, April 28–29, June 16–17, July 28–29, Sept. 15–16, Oct. 27–28 and Dec. 8–9. Key indicators to monitor before those meetings include monthly employment reports, CPI and PCE inflation readings, and wage growth signals (LiveNowFox).
Political and legal pressures on Fed leadership
The Fed is under heightened political scrutiny. President Trump publicly criticized Chair Powell for not cutting rates faster, increasing pressure from the White House for more aggressive easing (Fox Business).
Separately, legal inquiries have drawn attention: the Department of Justice subpoenaed documents related to roughly $2.5 billion in Federal Reserve building renovations — which Chair Powell has called a pretext — and the Supreme Court is set to consider a case involving efforts to remove Governor Lisa Cook. These developments add uncertainty to leadership dynamics (LiveNowFox).
Powell’s term ends in May 2026 and no successor has been named, which could influence policy decisions and communication in the coming months (LiveNowFox).
Global context
Other central banks are similarly cautious. For example, the Bank of Canada held its policy rate at 2.25%, illustrating parallel caution among North American central banks as they weigh inflation and labor-market data (CoStar).
Implications for The High Desert, California
Economic impact on residents and housing
For High Desert residents—including Victor Valley, Palmdale-area commuters and Mojave communities—the Fed’s pause means borrowing costs are likely to remain near current levels for now. Mortgage rates track broader credit-market expectations, so no immediate decline should be expected despite last year’s cuts (CoStar).
Local home construction and builders may feel restrained demand. The region’s appeal as an affordable alternative to coastal markets could be muted if mortgage rates do not fall, potentially slowing new starts and affecting contractors, suppliers and workers. Conversely, a gentler national labor slowdown could moderate prices and create buying opportunities for cautious local purchasers (Federal Reserve).
Small business and consumer spending
High Desert small businesses—retail, service providers and logistics-linked warehouses—will watch consumer spending. A pause in rate cuts keeps borrowing costs steady, affecting firms that need credit for equipment or expansion. Stable policy reduces the risk of sudden rate moves that could disrupt Main Street budgeting, though persistent inflation may keep lenders cautious (Fox Business).
Commuters and transportation hubs
The High Desert’s commuters to the Inland Empire and Los Angeles may see commuting costs influenced by fuel prices and consumer demand. A moderate slowdown in job growth could reduce commute miles for some households, while a gentle cooling is unlikely to trigger sharp job losses that would harm local tax revenues and services.
Banks, lenders and credit access
Local banks and credit unions will factor the Fed’s pause into lending decisions. A continued pause could keep lending standards steady and help qualified borrowers, but sustained inflation above target could increase pressure for future policy shifts that affect loan pricing (CoStar).
Public finances and local government projects
High Desert cities and counties that rely on stable borrowing costs for infrastructure and public-safety projects benefit in the short term from predictable interest expense estimates. Officials should monitor developments later in 2026 that could change bond yields and borrowing costs for capital projects (Federal Reserve).
Practical steps for residents and businesses
- Homebuyers: Lock rates only when financing is ready; expect mortgage rates to follow broader markets, not the Fed itself (CoStar).
- Small businesses: Review credit lines, consider fixed-rate borrowing if you fear later increases, and stay in contact with local lenders about terms.
- Local officials: Keep contingency plans for bond financing and prioritize projects that can proceed under current rate assumptions.
Source links and reporting notes
- Federal Reserve FOMC press release
- Fox Business coverage
- CoStar analysis
- Trading Economics U.S. interest rate data
- People’s Daily coverage
- LiveNowFox scheduling and reporting
Reporting note: This article draws from the Federal Reserve’s press release and contemporary reporting and analysis, including the Federal Reserve, Fox Business, CoStar, Trading Economics, People’s Daily and LiveNowFox.
