How long will the Fed pause interest-rate cuts after January FOMC?

Mary Helen Gillespie

January 27, 2026 6 min read

This story has been updated .

From Main Street to Wall Street , there are questions as to when interest rates will drop again.

The Jan. 28 meeting of the Federal Reserve 's policymaking panel paused interest-rate cuts as expected in its first meeting of 2026.

The benchmark Federal Funds Rate influences short-term borrowing rates, such as those on credit cards, auto financing, and student loans.

Fed Governors Stephan Miran and Christopher Waller dissented from the decision, voting to cut the funds rate by a quarter of a percentage point.

When can investors and consumers expect the Federal Open Market Committee to lower interest-rates this year?

"It's time to sit back and take a look at things," said Peter Hooper, vice chair of research at Deutsche Bank, told The New York Times. "We will get some further easing, but it's not urgent at this point."

Federal Funds Effective Rate ChartBoard of Governors of the Federal Reserve System

How the Fed manages interest rates

The Fed's dual congressional mandate requires it to balance inflation and job growth via interest rates.

Lower interest rates support hiring but can fuel inflation.
Higher rates cool prices but can weaken the job market.

The two goals often conflict, operate on different timelines and are influenced by unpredictable global events.

More Federal Reserve:

Fed faces 2026 upheaval as economy shifts, Powell exits

The FOMC cut the benchmark Federal Funds Rate three times for a total of 75 basis points in 2025 to land at 3.50% to 3.75% in part because of concerns about the weakening labor market.

After the December rate cut, Powell said that the lowering of rates brought monetary policy "within a broad range of neutral."

A neutral rate neither stimulates nor restrains economic growth.

When the Federal Reserve last paused interest rates

The Fed last paused interest rates in September 2023, holding the funds rate at 5.25% to 5.50% after a rapid tightening cycle aimed at curbing post-pandemic inflation.

The pause lasted nearly a year as policymakers wanted to see if the higher borrowing costs would tame inflation without dipping the economy into a recession .

During that pause, inflation gradually cooled and the labor market remained resilient.

The central bank resumed cutting rates in September 2025 once Fed officials became confident that inflation was moving sustainably toward the Fed's 2% target.

What could an interest rate cut timeline be?

Eric Diton ,President & Managing Director at The Wealth Alliance , said a key question facing Powell is whether he will continue to "be more 'data dependent' or can we expect a more concrete timeline on future rate cuts?"

Diton said if Powell leans toward a restrictive or neutral bias, that would be more bearish versus an easing bias.

"His comments with regard to the labor market, always a concern of the Fed, will be closely watched. Our feeling is that, while the labor market has weakened, it may not be enough to warrant another rate cut in the near term. Also, inflation is still in the high 2's, above the Fed target of 2%,'' Diton said.

Why the White House demands lower interest rates

President Donald Trump has spent the past year blasting Powell and the FOMC for not lowering rates to around 1% or lower.

The White House maintains this will stimulate the stagnant housing market and reduce the amount of interest on the nation's debt, which currently hovers between approximately $38.4 trillion and $38.5 trillion.

Is the White House trying to influence monetary policy?

This week's meeting comes after dramatic episodes Fed watchers say were instigated by the White House to influence lower rates and compromise the central bank's independence.

The Supreme Court heard arguments Jan. 21 in Fed Governor Lisa Cook's bid to stop Trump's attempt to fire her for cause on allegations of mortgage fraud.
Powell announced Jan. 11 that the Department of Justice issued subpoenas related to a criminal investigation into cost overruns of renovations at the Fed's headquarters.
Trump has said he will soon announce his nominee to replace Powell as chair in May, a candidate that the president has insisted will follow his lead on monetary policy .
Powell declined comment on the political pressures, except to say he felt his presence at Cook's Supreme Court hearing was a necessary show of support.

When is the next rate cut expected?

John Luke Tyner ,Portfolio Manager & Head of Fixed Income at Aptus Capital Advisors ,said Powell's press conference could shed light on his last two remaining FOMC meetings as president and what the committee would need to see to consider cutting before his term ends.

Currently, the market doesn't have the first cut in 2026 happening until July, after the new chair takes over.

The widely watched CME Group FedWatch Tool estimates the Fed's next quarter-percentage point cut:

March 18: 15.5%
April 29: 25.5%
June 17: 45.9%

"The market is pricing in just shy of two cuts for '26. This seems low given the change in Fed chair, the Fed's own outlook for lower inflation, rising productivity, wobbly labor market, and market based indicators such as "Truflation" showing current inflation well below the Fed's 2% target.'' Tyner said.

Powell defends interest-rate pause

In a statement, the FOMC said 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 statement said.

At a press conference following the announcement, Powell said that the labor market seems more stable and that most of the tariff impacts on goods inflation should work their way through prices by the middle quarters of 2026.

Tension between strong growth and the soft labor market has been resolved somewhat, Powell said.

Upside risk to inflation and downside risk to employment both appear to have diminished since the December meeting, Powell said.

He described the economy as "stronger" and "growing," adding that it appears to be on "the higher end'' of neutral.

When asked if the committee was considering future cuts this year, Powell responded "we're well positioned here to let the data speak for us.'' He deflected to give a timeline for future rate cuts.

"If demand and supply are in balance, you could say that is full employment,'' Powell said. "But at the same time, do we really feel like that is a maximum employment economy? You know, it is a very challenging and quite unusual situation."

What the impact might be on the Treasury market

Mike Sanders ,Head of Fixed Income at Madison Investments ,said despite some lingering noise in the data from last year's government shutdown, the broader picture does not justify a rate cut:

"The labor market appears to be stabilizing, while inflation continues to moderate. With the Fed having already delivered substantial easing in 2025, we do not expect to see another cut until mid-year."
"While there will not likely be meaningful volatility in the Treasury market around this meeting, risk remains skewed toward higher yields on the 10-year and longer part of the curve."

Tyner said the Treasury market "could certainly see volatility remain elevated based on the direction of the press conference and language from Powell.''

This story was originally published by TheStreet on Jan 27, 2026, where it first appeared in the Fed section. Add TheStreet as a Preferred Source by clicking here.