Experts on the Fed’s decision to hold rates steady
29 JAN, 2026
By Joanna Piwko from RankiaPro Europe
The US Federal Reserve’s decision to keep interest rates unchanged at 3.50%–3.75% has prompted a broadly aligned response from market experts: confidence in economic resilience has grown, inflation remains sticky but manageable, and the central bank is in no rush to cut rates again. While the meeting itself was relatively calm, political uncertainty and internal dissent within the Fed continue to shape expectations.
A more confident Fed, but still cautious
Several commentators noted a clear improvement in the Fed’s assessment of the economic outlook. Dan Siluk, Director of Global Short Duration & Liquidity and Portfolio Manager at Janus Henderson, highlighted that the decision reflects confidence in stabilizing labor markets and stronger economic activity. Although inflation is still described as “somewhat elevated,” the overall tone suggests little urgency for near-term rate cuts.
Paolo Zanghieri, Senior Economist at Generali AM (Generali Investments), echoed this view, pointing to the FOMC’s more optimistic language on growth and employment. Chair Jerome Powell emphasized that the US economy has “once again surprised with its strength,” supported by a stable unemployment rate of 4.4% and improving activity data. According to Zanghieri, these dynamics give the Fed room to pause and assess incoming data rather than act quickly.
Inflation: sticky, but expectations remain anchored
Inflation remains a central concern, though experts broadly agree that risks have moderated. Paolo Zanghieri noted that core PCE inflation is expected to end 2025 at 3.0% year-on-year, with persistence largely driven by goods prices affected by tariffs. Powell suggested this impact is likely temporary, with disinflation expected to resume in the coming months.
Richard Flax, Chief Investment Officer at Moneyfarm, underlined that US inflation has continued to decline, reaching 2.7% in December, moving closer to the Fed’s 2% target. Importantly, longer-term inflation expectations remain well anchored, reinforcing the Fed’s credibility despite political noise.
A hawkish tilt, but limited market impact
Jean Boivin, Head of the BlackRock Investment Institute, identified a subtle hawkish shift in the Fed’s communication. The removal of references to downside risks to employment and Powell’s comments about stickier inflation suggest a firmer stance. However, Boivin argued that this shift does not materially change the broader narrative: markets still expect two quarter-point rate cuts this year, with the first not fully priced in until July.
This assessment was reflected in muted market reactions. Treasury yields and the S&P 500 remained largely unchanged during and after the press conference, indicating that investors saw little new information to alter expectations.
Internal dissent and a data-dependent pause
One notable surprise from the January meeting was the presence of two dissenting votes. Governors Christopher Waller and Miran both favored a rate cut, highlighting an internal split within the FOMC. Nevertheless, the majority appears comfortable adopting a patient, data-dependent approach, supported by firmer growth and a labor market that no longer shows signs of rapid deterioration.
Most experts now expect the Fed to pause further rate cuts at least until June, barring a sharp and unexpected drop in inflation.
Political uncertainty looms large
Beyond macroeconomic data, political considerations are increasingly in focus. Jean Boivin pointed out that Fed communications may soon be overshadowed by the expected announcement of a new Fed Chair nominee, as Jerome Powell’s term ends in mid-May.
Richard Flax stressed that global investors will be watching closely for signals that the Fed’s independence will be preserved, especially amid rising political pressure and fiscal challenges. Powell himself largely avoided political commentary, though he emphasized that inflation expectations are a more reliable gauge of policy credibility than asset prices such as gold.
Bigger questions ahead
Overall, experts agree that the January FOMC meeting was calm and uneventful in market terms, reinforcing the idea that the Fed is currently well positioned to wait. With growth holding up, unemployment stable, and inflation slowly easing, the central bank has bought itself time. The next major catalysts are likely to come not from economic data alone, but from the evolving political landscape and leadership transition at the Fed.
