- Decision
- Maintain
- Rate change
- 0 bps
- Federal funds rate
- 3.75%
The Federal Open Market Committee kept the federal funds rate target range unchanged at 3.50–3.75 percent at its 28 January 2026 meeting, judging that solid economic expansion, still-elevated inflation and a stabilising unemployment rate amid heightened outlook uncertainty warranted no immediate policy move. The decision follows three successive 25 bp cuts between September and December 2025 that lowered the range from 4.00–4.25 percent to its current level. To implement the stance, the Federal Reserve will pay 3.65 percent on reserve balances, guide the funds rate within the target corridor through open-market operations, offer standing overnight repos at 3.75 percent and reverse repos at 3.50 percent with a USD 160 billion per-counterparty cap, and will continue Treasury bill purchases and full reinvestment of principal payments to maintain ample reserves, while the primary credit rate remains 3.75 percent. The Committee noted economic activity is growing solidly, job gains are low but unemployment has steadied, and inflation is “somewhat elevated.” It reiterated that future adjustments will be data-dependent and pledged to alter policy if risks emerge that threaten progress toward its maximum-employment and 2 percent inflation objectives.
Rate evolution
From June 2025 to September 2026, the Federal Reserve lowered the target range for the federal funds rate by a net 50 basis points, from 4-1/4 to 4-1/2 percent to 3-3/4 to 4 percent, after holding steady through mid-2025, cutting over September to December, pausing through July 2026 and raising the range in September. The initial holds reflected activity that was still expanding, a low unemployment rate and solid labor market conditions, alongside inflation that remained somewhat elevated, while uncertainty had diminished somewhat in June but was still elevated and risks were seen on both sides of the dual mandate. Cuts began as growth moderated, job gains slowed, unemployment edged up and the Committee judged downside risks to employment had risen, even though inflation had moved up and remained somewhat elevated, with the late-2025 easing accompanied by dissents both for larger cuts and for no change.
The Committee kept the federal funds rate unchanged in April, June and July 2026 as activity expanded at a solid pace, unemployment changed little and inflation remained elevated. April cited higher global energy prices, while June and July pointed to supply shocks that drove price increases in certain sectors, including energy, and highlighted strong productivity growth, capital investment and job gains that kept pace with the workforce, while linking elevated uncertainty in part to the conflict in the Middle East. After three members dissented in July in favor of a 1/4 percentage point increase, the Committee unanimously raised the target range by that amount on September 16, citing resilient domestic spending, strong productivity growth, robust capital investment and elevated inflation, and said the action would support a timelier return to its 2 percent goal.