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Fed leaves rates unchanged to start 2026: Is a cut coming in March?

January 29, 2026

The Federal Reserve held interest rates steady in January. Learn what investors can expect at the March meeting and how inflation and a shift in Fed leadership could affect rate decisions.

Key takeaways

The Federal Reserve (Fed) held its benchmark interest rate in a range of 3.5% to 3.75% at the January meeting, pausing its recent rate-cutting trend.
The market sees low odds of the Fed choosing to cut at its March meeting, but our strategists still expect one rate cut in 2026.

Contributors

Seth Carlson

Editorial staff, J.P. Morgan Wealth Management

The Federal Reserve (Fed) kept interest rates steady at its January 28 meeting, as expected. The Federal Open Market Committee (FOMC), which sets the central bank’s rate decisions, voted to maintain the benchmark federal funds rate at 3.5% to 3.75% following three rate cuts in 2025. Two of the committee’s 12 voting members dissented, preferring a quarter-point cut instead.¹

At his post-meeting press conference on January 28, Fed Chair Jerome Powell explained the committee’s decision, sharing that it was “hard to look at the data and say that policy is significantly restrictive right now.”² He expects the Fed to continue to make its decisions on a meeting-by-meeting basis, though our strategists don’t anticipate a rate cut until summer.

Key questions ahead of the next Fed meeting

The next FOMC meeting will take place on March 17 and 18, with the policy announcement scheduled for March 18.³ That’s about seven weeks away, giving policymakers time to review fresh economic data before making their next move. Between now and then, there are several indicators the Fed will be monitoring to assess their dual mandate. We dive deeper below.

What’s the status of inflation?

After 2025’s government shutdown caused a data blackout for much of the fall, the December Consumer Price Index (CPI) ultimately showed year-over-year inflation at 2.7%. This is an improvement from 3% in September and closer to the Fed’s target rate of 2%.⁴ But as Washington heads for another potential shutdown, policymakers could face disruptions to official inflation reports. With interest rate decisions so heavily reliant on accurate and timely data, any collection or processing delays could generate more uncertainty around monetary policy moves.

Is the job market resilient?

Low private payroll growth and labor market softness in late 2025 prompted the Fed to cut rates at three consecutive meetings beginning in September. However, Powell emphasized at the first meeting of 2026 that economic activity remains solid and the balance of risks to the Fed’s dual mandate is improving. Importantly, most of the labor market weakness has stemmed from subdued hiring rather than widespread layoffs, indicating underlying resilience.

As policy uncertainty diminishes, optimism about a cyclical recovery in 2026 is growing. Hiring demand is expected to improve modestly throughout the year, helping to cap any further rise in the unemployment rate. Consensus estimates point to average monthly job growth of around 67,000 in 2026. Small businesses –which employ nearly half the U.S. workforce – have reported a recent uptick in hiring activity. Powell also highlighted “signs of stabilization” in the unemployment rate, even as overall hiring remains moderate. The FOMC will continue to monitor labor market trends to ensure the recovery remains on track.

Will there be a new Fed chair?

Powell’s term ends in May, though he could continue serving as a Fed governor until 2028. President Donald Trump is expected to announce who the new Fed chair will be in the coming weeks. Despite new Fed leadership, institutional guardrails are expected to preserve the Fed’s independence and neutral policy stance. Indeed, the Fed chair can’t dictate policy alone; any rate decisions require consensus building among voting members of the FOMC.

Will the Fed cut rates in 2026?

Our strategists anticipate one more rate cut this year, in line with consensus. Current economic indicators, however, make it difficult for the Fed to justify additional rate cuts right now.

Bonds are likely finding their footing as the Federal Reserve approaches its neutral rate. In this environment, we’ve seen a steepening of U.S. Treasury yields, making longer-term fixed income instruments more attractive relative to cash. Steeper yield curves incentivize investors to move out of cash, seeking a more balanced fixed income allocation in line with their long-term investment goals.

The bottom line

The Federal Reserve paused its interest rate cuts in January and is expected to do the same at its March meeting. Trends around inflation and employment will continue to influence the central bank’s decisions in the months ahead. Consider talking to a J.P. Morgan advisor to learn how to potentially position your portfolio in this environment.

References

Federal Reserve, “Federal Reserve Issues FOMC Statement.” (January 28, 2026)

Federal Reserve, “Transcript of Chair Powell’s Press Conference Opening Statement.” (January 28, 2026)

Federal Reserve, "Meeting Calendars, Statements, and Minutes." (Accessed January 28, 2026)

Bureau of Labor Statistics, “Consumer Price Index Summary.” (January 13, 2026)

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Key takeaways

Contributors