Fed Pauses After Rate Cuts as Powell Weighs Inflation and Jobs

The Federal Reserve held interest rates steady at its latest meeting in late January, pausing after three consecutive rate cuts as officials weigh lingering inflation pressures against signs of labor market softening.

Fed Chair Jerome Powell said the U.S. economy is entering 2026 on “a firm footing,” with consumer spending resilient and business investment expanding, even as job gains remain low and housing activity stays weak. Powell noted that inflation has eased significantly from its 2022 peak but remains “somewhat elevated,” with tariffs continuing to push goods prices higher.

Powell said the Fed views tariff-driven inflation as likely a one-time price increase and emphasized that disinflation is continuing in the services sector, while longer-term inflation expectations remain anchored near 2%. With rates now within a range of plausible estimates of neutral after 75 basis points of cuts, Powell said policymakers are “well positioned” to assess incoming data and make decisions meeting by meeting.

Powell also acknowledged dissent within the committee, highlighting ongoing tension between inflation risks and labor market downside risks.

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