Federal Reserve interest rate paused: FOMC January 2026 vote keeps federal funds rate at 3.5%–3.75% as inflation stays above target
The Federal Reserve’s FOMC on January 28, 2026, voted 10-2 to keep the federal funds rate at 3.5%–3.75%, pausing after three late-2025 cuts as inflation remains above the 2% target and the labor market shows signs of slowing.
Key takeaways
- FOMC vote: 10-2 to leave the target range at 3.5%–3.75% (dissents from Governors Stephen Miran and Christopher Waller).
- Pause after cuts: The decision pauses three consecutive 25bp cuts made in September, October and December 2025 — a shift toward a data-dependent stance.
- Inflation and labor: PCE inflation ran about 2.9% year-over-year through December and policymakers cited slowing job gains with stabilizing unemployment.
What the Fed said and why it paused
At its first meeting of 2026 the FOMC left the benchmark federal funds rate in the 3.5%–3.75% range. The official statement highlighted continued solid economic growth, smaller job gains, and inflation that remains somewhat elevated. The full press release is available from the Federal Reserve.
The committee’s pause follows three straight quarter-point cuts in late 2025 intended to ease financial conditions as growth slowed. Officials agreed to hold in January because incoming data showed a cooling labor market and inflation still above the Fed’s 2% goal. The Fed’s preferred measure, the personal consumption expenditures (PCE) price index, was reported near 2.9% year-over-year through December, with goods-price pressures and tariffs cited as contributing factors; services inflation has moderated, according to Fox Business.
Vote split and internal debate
The FOMC vote was 10-2, with Governors Stephen Miran and Christopher Waller dissenting in favor of a 25bp cut at this meeting. The split highlights ongoing disagreement among policymakers over how quickly to loosen policy while monitoring inflation and employment. Fed Chair Jerome Powell characterized the decision as data-driven, noting the Fed had cut policy by 175bp since late 2024, providing room to “let the data speak.”
Economic backdrop and risks
Officials pointed to a slowing labor market — with smaller monthly job gains and stabilizing unemployment — alongside inflation that remains above target. Some persistence in inflation is attributed to goods-sector pressures, including tariffs and supply issues, while services inflation has cooled, per reporting by Fox Business.
Policy takeaway: The Fed’s cautious language and the vote split reflect uncertainty on the path forward; markets and economists expect the Fed to remain patient and monitor incoming data before further moves.
Political and leadership pressures
The Fed’s decision comes amid elevated political scrutiny. The White House and other actors have publicly urged faster cuts to lower borrowing costs, and Chair Powell is facing a Department of Justice inquiry related to Fed building renovations — developments Powell has criticized as political interference. Powell’s term as chair ends in May 2026, and debate over successors, plus a pending Supreme Court case about governor removal, add governance uncertainty (reported by LiveNowFox and Fox Business).
Market and expert reaction
Analysts broadly interpreted the Fed’s move as a signal of patience. Morgan Stanley’s Ellen Zentner said the Fed is watching stabilizing labor markets and steady inflation, while Charlie Ripley of Allianz suggested a long pause near neutral rates is sensible. Futures markets priced a high chance the Fed would hold again in March, with possible cuts pushed into the summer if inflation slows further, a trend tracked by futures and reporting such as LiveNowFox.
Immediate financial effects
Keeping the federal funds rate steady means borrowing costs for consumers and businesses remain elevated relative to pre-2022 levels. That affects mortgage rates, auto loans, credit cards and business financing. For households in Los Angeles and across California, steady rates can keep monthly payments high for home and auto buyers while slowing housing price acceleration, based on market coverage from Fox Business and LiveNowFox.
Implications for Los Angeles, California
Economic impact: local mortgages and housing
Los Angeles faces some of the nation’s highest housing costs. A Fed pause likely keeps mortgage rates near current levels, slowing sales and limiting refinancing opportunities. Builders may remain cautious due to higher borrowing costs for development, and renters could see slower rent growth but still-high baseline housing costs.
Jobs and businesses
LA’s economy relies on services — entertainment, hospitality and tourism. A softer national labor market can translate to weaker local hiring. Small businesses dependent on loans for inventory or expansion may face tighter financing; larger firms could delay hiring or investment until inflation shows clearer progress downward.
Household budgets
For many Angelenos, steady interest rates mean elevated credit-card and auto loan rates. Those with adjustable-rate debt may see higher payments persist. Short-term relief from larger-than-expected tax refunds for some households could spur local spending and support hiring in retail and services.
Political consequences
State and local leaders will monitor how the Fed affects tax receipts and employment. Slower national growth can reduce sales and income tax revenues, complicating local budgets and prompting debate over policies to ease housing costs and support small businesses.
Social and cultural effects
In a city with high rates of gig and freelance work, softer job growth can disproportionately affect part-time and contract workers, potentially increasing calls for expanded safety nets. Cultural institutions and entertainment firms that depend on discretionary spending could see slower ticket and box-office revenue if household budgets tighten.
Practical takeaways for Angelenos
- Homebuyers: Shop around and consider locking rates if you find an acceptable mortgage.
- Renters: Expect slower rent growth but remain prepared for high baseline housing costs.
- Small businesses: Reassess borrowing plans and explore alternatives to traditional bank loans.
- Workers: Those in hospitality, entertainment and retail should monitor local hiring announcements closely.
