Fed Holds Rates Steady Amid Uneven US Economic Growth
The Federal Reserve has decided to keep interest rates steady at its January 2026 meeting, signaling a cautious approach as the US economy exhibits uneven growth across sectors.
Mixed signals in economic data have led policymakers to balance persistent inflation pressures with signs of a cooling labor market. Consumer spending remains resilient, but manufacturing activity has contracted for three consecutive months and the housing market continues to struggle with elevated mortgage rates.
The labor market is still adding jobs, but wage growth has slowed down, which could ease inflationary pressures over time. Inflation, as measured by the Consumer Price Index, stood at 3.2% year-over-year in December 2025, down from a peak of 9.1% in June 2022 but still above the Fed's 2% target.
The central bank's updated economic projections show a median expectation of two rate cuts in 2026, but the timing remains uncertain. Market participants now price in a roughly 60% probability of a rate cut by June, according to CME FedWatch.