The Federal Reserve Holds Rates Steady as Leadership Transition Nears

January 30, 2026

Following its two day meeting, the Federal Reserve held interest rates steady at a range of 3.5% to 3.75%, in line with investor expectations. The decision comes against a backdrop of mixed economic data: inflation remains elevated but continues to trend downward, consumer spending has proven stronger than expected, and the labor market shows some signs of stabilization.

Why the Fed held rates steady

Several factors explain why the Fed chose to maintain its current policy stance:

• Easing Inflation and Mixed Economic Signals: Year-over-year inflation, though still above the Fed’s long term 2% target, continues to drift lower based on recent Core CPI and PCE readings. At the same time, the labor market remains weak but stabilizing, while consumer spending continues to hold up.
• Monitoring the Effects of Recent Easing: Keeping rates unchanged enables the Fed to assess how the 75 basis points of monetary easing implemented in late 2025 are impacting economic conditions.
• Continued Emphasis on Data Dependency: The December meeting minutes reflected that monetary policy will be informed by the evolving economic outlook and the balance of risks, reinforcing the Fed’s focus on data dependency as it evaluates appropriate timing and direction of future policy moves.

Key updates from Chairman Powell’s press conference

• Chairman Powell noted that upside risks to inflation and the downside risks to employment have "probably both diminished a bit."
• Powell commented that economic activity has been "expanding at a solid pace" and the growth outlook has improved, suggesting that current rates are not significantly restrictive.

Looking ahead

• Key data before the March meeting: Inflation data, health of the labor market and consumer spending trends will be in focus.
• Market expectations: Current expectations point to additional rate cuts in mid-2026.
• Risks to the outlook: Potential inflation reacceleration, further labor market softening, unanticipated additional tariff related cost pressures, and persistent geopolitical uncertainty could impact monetary policy.
• Upcoming Change in Federal Reserve Leadership: Chairman Powell’s term ends in May 2026, and the administration has nominated Kevin Warsh as his successor. Warsh, a former Federal Reserve governor, had previously been identified as one of several finalists. The upcoming leadership transition introduces an additional layer of uncertainty, but it’s important to remember that the Federal Reserve’s institutional framework — anchored by its voting structure and independent perspectives of its regional governors — is designed to ensure a consistent and deliberative approach to monetary policy.

For additional insights on current market conditions, please read Citizens Private Wealth's 2026 Investment Outlook. Look for additional commentary from the Office of the CIO as we continue to monitor developments around the Federal Reserve leadership transition.