Honestly, if you were expecting a massive shift in your mortgage rate or credit card bill this week, the Federal Reserve just handed you a big "not so fast."
On January 28, 2026, the Federal Open Market Committee (FOMC) is widely expected to keep the federal funds rate exactly where it is: in the 3.50% to 3.75% range. This follows a fairly aggressive string of cuts at the end of 2025 where they trimmed things down by 75 basis points in total. But right now? The Fed is basically in "wait and see" mode.
The Fed’s Decision on Interest Rates: The Great 2026 Balancing Act
Jerome Powell is in a tough spot. His term as Chair ends in May 2026, and he’s navigating a political minefield that would make anyone sweat. Just this month, the Justice Department opened a criminal investigation into the Fed’s headquarters renovation. Powell didn't hold back, calling the probe "politically motivated" and a direct challenge to the Fed's independence.
Politics aside, the math is getting weird.
Inflation is currently sitting around 2.7% to 2.8%, which is still north of that magical 2% target the Fed obsesses over. On the flip side, the labor market is looking... fragile. We saw layoffs surge to 1.2 million in 2025. While the unemployment rate retreated slightly to 4.4% in December, job growth has been concentrated almost entirely in healthcare and education.
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Why the "Neutral Rate" is the New Obsession
You've probably heard economists talk about the "neutral rate." Basically, it’s the interest rate that neither jumpstarts the economy nor puts the brakes on it.
Fed Vice Chair Philip Jefferson recently mentioned that the current 3.5%–3.75% range is getting close to that neutral zone. But here is the catch: nobody actually knows where the neutral rate is. It’s a moving target. If the Fed keeps rates too high (restrictive), they risk a recession. If they cut too fast, inflation—which is already "sticky" due to recent tariff impacts—could come roaring back.
What This Means for Your Wallet
Let’s talk real world.
If you’re waiting for 3% mortgage rates to come back, I’ve got bad news. They aren't coming. Even with the Fed's decision on interest rates to hold steady or cut slightly later this year, the 30-year fixed mortgage is still hovering in the low 6% range.
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- Savings Accounts: You’re likely seeing those high-yield savings rates start to dip. If you’re sitting on cash, now is the time to look at locking in a CD before the Fed eventually cuts again in mid-2026.
- Credit Cards: Don't expect much relief. APRs are still incredibly high. A 0.25% cut doesn't change a 24% APR in any meaningful way.
- Stocks: Wall Street actually likes a pause sometimes. It signals stability. The S&P 500 has stayed resilient because, despite the drama, the Fed isn't hiking anymore.
The "Jobless Growth" Scare
There is a growing theory among experts at Goldman Sachs and the SF Fed that we are entering a period of "jobless growth." This is where GDP looks great (projected at 2.5% for 2026), but companies aren't hiring because they're leaning into AI and "efficiency-enhancing measures."
David Mericle, chief US economist at Goldman, pointed out that the labor market is the most uncertain piece of the 2026 puzzle. If people stop getting hired, consumer spending drops. If spending drops, the Fed has to cut rates—hard.
Is a March Cut on the Table?
The market is currently betting on a hold in January, but March is a toss-up.
Fed Governor Michelle Bowman has been the "hawk" in the room, arguing that we shouldn't rule out more cuts if the labor market weakens. Meanwhile, other officials are worried that the "one-off tariff effects" on prices might not be as "one-off" as they hope.
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It’s a split camp. At the December meeting, three members dissented. That is a lot of internal disagreement for an organization that usually likes to project a united front.
Actionable Steps for 2026
Stop waiting for a "perfect" rate. It doesn't exist.
If you are a homebuyer, look at the "belly of the curve." Intermediate-term bonds (3-7 years) are showing where the smart money is moving. If you're an investor, the era of "easy money" is over, but the era of "stable money" might just be beginning.
- Refinance Reality Check: If your current mortgage is above 7.5%, a move to 6.2% is a win. Don't hold out for 4%—you might be waiting years.
- Short-Term Treasuries: With the fed funds rate at 3.64%, 4-week to 3-month Treasury bills are still a great place to park cash with almost zero risk.
- Watch the "Blackout" Ends: The Fed is currently in a "blackout period" until the January 28 meeting. Watch the headlines on January 29; that’s when the real talk starts.
The Fed isn't just managing interest rates anymore; they're managing a transition. From Jerome Powell’s legacy to the rise of AI-driven productivity, 2026 is shaping up to be the year where "steady" is the best we can hope for.
Next Step: You should review your current high-yield savings account rate. Many banks are already lowering their APYs in anticipation of the Fed's long-term downward trend. If your rate has dropped below 4%, it may be time to move funds into a 12-month CD to lock in current yields.