#FedWatc : January 2026 Policy Update

Current Snapshot: The January Meeting

Market expectations are nearly unanimous for this week’s decision. Data from the CME FedWatch Tool and major financial institutions suggest the following:

* Decision Date: Wednesday, January 28, 2026 (2:00 PM ET).

* Probability of a Pause: Between 95.4% and 97% of market participants expect rates to remain unchanged.

* Current Target Range: 3.50% – 3.75%.

The "Wait and See" Strategy

Following a 75-basis-point reduction in late 2025, Chair Jerome Powell and the Committee are navigating a "tug-of-war" between two economic signals:

* Sticky Inflation: Annual inflation remains around 2.7%–2.8%, still above the Fed’s 2% target.

* Labor Market Cooling: While the job market isn't "broken," it has shown signs of fragility, with unemployment ticking up slightly.

> Key Sentiment: Officials believe current rates are "appropriately positioned" (near the estimated neutral level) to support employment without reigniting inflation.

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What’s on the Horizon for 2026?

While this meeting is expected to be a "quiet" hold, the rest of 2026 is shaping up to be volatile:

* Leadership Transition: Chair Powell’s term ends in May 2026. Markets are already speculating on a new, potentially more dovish chair.

* Rate Forecasts: The Fed's "dot plot" suggests only one more cut later this year, though some analysts (like those at Goldman Sachs) predict a more aggressive path toward a terminal rate of 3.0% – 3.25% by year-end.

* Political Pressure: The Fed remains under intense scrutiny, with the administration advocating for deeper cuts to stimulate growth.

Fed Forecast Table

| Meeting Date | Market Expectation | Context |

|---|---|---|

| Jan 28, 2026 | Hold (3.50% - 3.75%) | Assessing the impact of 2025 cuts. |

| March 2026 | Possible 25bps Cut | Dependent on Q1 inflation data. |

| June 2026 | High Uncertainty | First meeting under potential new leadership. |

Would you like me to create a summary of how these interest rate projections might affect mortgage rates or the stock market for the rest of the quarter?