Fed pauses after three cuts, holding rates at 3.5%–3.75% as labor market and inflation raise caution
The Federal Reserve held the federal funds rate at 3.5%–3.75% after its January 27–28, 2026 FOMC meeting, pausing after three cuts as officials weigh slowing job growth and inflation remaining above the 2% target, and consumer impacts.
- FOMC voted 10–2 to hold rates; Governors Stephen Miran and Christopher Waller dissented, preferring a 25 basis-point cut.
- Core PCE inflation is about 2.9%, above the Fed’s 2% target—one key reason for the pause.
- Fed will remain data-dependent, watching labor-market signals, inflation, and tariff-driven price pressures before resuming cuts.
- Local impacts: Inland Empire borrowers and builders may see slower housing activity and sustained borrowing costs.
What the Fed decided and why
At the close of its two-day meeting, the Federal Open Market Committee chose to keep the federal funds rate in the 3.5%–3.75% range. Officials said they will monitor incoming data carefully and stand ready to adjust policy to support maximum employment and return inflation to 2%. The decision follows three consecutive 25 basis-point cuts in September, October and December 2025.
The Fed’s statement highlighted a still-expanding economy with “weaker job gains” and a stabilizing unemployment rate, while underscoring inflation remaining above target. Chair Jerome Powell framed the move as data dependent, noting signs of cooling in services inflation even as goods inflation stays elevated and recent tariff policies add upward price pressure.
Source: Federal Reserve press release
Split vote and internal debate
The committee’s 10–2 vote reflects internal disagreement. Governors Stephen Miran and Christopher Waller dissented, arguing for a 25 basis-point cut to ease policy faster amid signs of slowing wage and job growth. Other officials emphasized uncertainty about how fast inflation pressures will abate and preferred caution.
The pause follows three straight cuts late in 2025 as the Fed weighs mixed signals from labor and price measures.
Inflation, the labor market and the data the Fed is watching
The Fed’s preferred inflation gauge, core Personal Consumption Expenditures (PCE), is running at roughly 2.9%, above the 2% goal. At the same time, the labor market has cooled from its peak in 2024 and early 2025: job growth has slowed and unemployment has stabilized, producing mixed readings on momentum.
Officials also flagged that tariffs on goods have added to inflationary pressure; while goods inflation may peak and later decline if no new tariffs are imposed, that remains an uncertain factor the Fed must monitor.
Sources: Federal Reserve press release; reporting: People’s Daily
Market and economist reactions
Markets mostly anticipated a pause. Pricing tools showed investors largely expecting no change in March, reflecting a “wait-and-see” posture. Economists were split: some describe the stance as cautious but leave room for cuts later in 2026 if inflation and labor data soften.
“Data dependent” — that was the repeated refrain from policymakers, leaving the door open to easing later if conditions warrant.
Analysts from Morgan Stanley and Allianz suggested cuts could return by mid-2026 if trends continue to improve, while others warned that fiscal disruptions or worsening data could change the outlook.
Reporting: Fox Business coverage
Political and institutional context
The Fed’s actions unfolded amid political pressure and legal scrutiny. President Trump publicly criticized Chair Jerome Powell for not cutting rates faster and called for quicker easing. Powell’s term as Fed chair ends in May 2026; no successor has been named.
Separately, the Department of Justice issued a subpoena related to $2.5 billion in Federal Reserve headquarters renovations—an inquiry Powell said distracted from monetary policy work. The Supreme Court is reportedly considering a dispute over efforts to remove Governor Lisa Cook from office, with justices leaning toward leaving her in place while legal questions are sorted. These developments add a public layer to the Fed’s policy work.
Reporting: LiveNowFox summary
FOMC calendar and what’s next
The Fed released its 2026 meeting schedule. Upcoming dates include March 17–18 and June 16–17, among others. Many economists view the June meeting as a likely earliest point for resumed cuts if inflation and labor indicators continue to soften.
Full list of 2026 FOMC meetings: March 17–18; April 28–29; June 16–17; July 28–29; September 15–16; October 27–28; December 8–9.
Source: LiveNowFox summary
Implications for the Inland Empire
Economic impact
Keeping rates steady at 3.5%–3.75% means borrowing costs remain elevated relative to pre-2022 levels. For Inland Empire residents, this affects mortgage rates, auto loans and small-business borrowing. A pause is likely to keep mortgage rates from falling immediately, slowing refinancing and dampening demand for new home purchases. Local developers may delay projects if financing costs stay high.
Sources: Federal Reserve press release; Trading Economics
Political consequences
Local leaders in Riverside and San Bernardino counties will monitor jobs and housing activity closely. A slower housing market could affect permit revenues and real-estate tax receipts, prompting officials to adjust budgets and consider local support for workforce and housing programs.
Social effects
Higher borrowing costs tend to hit lower- and middle-income households hardest. Inland Empire families relying on credit for emergencies could face higher monthly payments, while slower job growth might weigh on wage gains and increase demand for community assistance and workforce re-skilling.
Cultural relevance
The Inland Empire’s long commutes, large logistics sector and growing suburban neighborhoods mean that rate stability may slow home-price growth in outlying communities, affecting local debates on growth, zoning and transit investment.
Practical applications for residents and businesses
- Homebuyers: Expect mortgage rates to remain relatively high until the Fed signals cuts. Shop around and lock rates if you find a favorable offer.
- Borrowers: Plan for steady borrowing costs; businesses should review capital plans and consider locking financing for critical projects now.
- Small businesses: Tight credit could delay expansion—look for community banks and local programs offering competitive terms.
- Job seekers: If the labor market cools, keep skills current; local community colleges and workforce programs can help.
- Local officials: Monitor permits, sales tax receipts and unemployment figures to adjust budgets and social-service planning.
