Haciyev Reşit 
The US Federal Reserve (FED) kept interest rates unchanged at its January policy meeting, in line with market expectations. While the decision was closely watched by global markets, it confirmed that the FED continues to maintain a cautious stance in its monetary policy. Following the decision, FED Chair Jerome Powell delivered important messages in a live address regarding the current state of the US economy, the inflation outlook, and potential future monetary policy steps. The decision to hold rates steady received broad support within the committee, although two FED officials dissented in favor of a 25 basis-point rate cut, signaling ongoing differences of opinion among policymakers.
Key Takeaways from the FED’s Rate Decision
After cutting interest rates three times last year, the FED paused its easing cycle for the first time since July. Powell stated that the current policy stance is appropriate at this stage and emphasized that decisions will be made on a meeting-by-meeting basis depending on incoming data. According to Powell, the fundamentals of the US economy remain strong, and the economy is entering 2026 on solid footing. Consumer spending continues to show strength, business investment remains on an upward trend, while activity in the housing sector remains weak.
The FED Chair noted that inflation is running slightly above target but that the overall outlook remains in line with expectations. Powell indicated that the annual Personal Consumption Expenditures (PCE) inflation rate for December is expected to be around 3%, adding that elevated inflation is largely driven by the impact of tariffs imposed on goods.
Regarding the labor market, Powell said that job growth has slowed, but there are signs that the unemployment rate has stabilized. He also added that the slowdown in services-sector inflation appears to be continuing.
“Interest rates may currently be near the upper bound of the neutral range. However, in light of new data, it is difficult to say that policy is clearly restrictive. We will allow the data to guide us.”
What’s Next for the FED’s Interest Rate Policy?
Powell emphasized that there is no predetermined path regarding the timing or size of future rate cuts. He reiterated that FED decisions are driven entirely by economic data and noted that risks on both the inflation and employment fronts have declined recently. However, he stressed that if the economic outlook deviates from the FED’s targets, the central bank will not hesitate to take the necessary actions. Powell also highlighted the importance of the FED’s independence, underlining that monetary policy must remain free from political pressure and focused on objectivity and long-term economic stability.
FED Maintains a Cautious Stance
The FED’s January rate decision and Jerome Powell’s remarks clearly demonstrate the central bank’s continued commitment to a cautious, flexible, and data-dependent monetary policy approach. The gradual process of bringing inflation under control and the ongoing stability in the labor market will remain key factors in shaping future interest rate decisions. Experts believe the FED is well-positioned to closely monitor economic data and make swift policy adjustments when necessary, an approach aimed at limiting uncertainty in financial markets.
You can also freely share your thoughts and comments about the topic in the comment section. Additionally, don’t forget to follow us on our Telegram, YouTube and Twitter channels for the latest news and updates.