Everyone is asking the same thing. Seriously, whether you're staring at a mortgage application or just trying to figure out why your high-yield savings account isn't yielding quite as high as it used to, the question remains: will Fed cut rates again this month?
The short answer? Probably not.
But it’s a lot more complicated than a simple "yes" or "no." As we sit here in mid-January 2026, the Federal Reserve is caught in one of the weirdest political and economic crossfires we've seen in decades. You have Jerome Powell—the guy who has been at the helm since 2018—literally fighting for his professional life while the economy throws mixed signals like a malfunctioning traffic light.
The Chaos Behind the Curtain
Right now, the Effective Federal Funds Rate is sitting at 3.64%. We just came off a series of cuts in late 2025, where the Fed chopped rates by 100 basis points in a few months. It felt like we were finally heading back to "normal." But then January hit, and things got messy.
Jerome Powell is currently under a Department of Justice investigation over building renovations at the Fed headquarters. Yeah, you read that right. It sounds like a plot from a political thriller. Powell himself went public on January 11, basically saying the investigation is a "pretext" for a political pressure campaign to force lower rates.
When the Chairman of the Fed is holding press conferences about criminal probes instead of just core PCE data, the markets get twitchy.
Historically, the Fed hates to move when there’s this much noise. They like to be the "boring" adults in the room. If they cut rates now, it looks like they’re caving to the White House. If they don’t, they risk looking like they’re being stubborn just to prove a point. Honestly, it's a mess.
What the Data Actually Says
Politics aside, the numbers are stubborn.
The latest Consumer Price Index (CPI) report from early January showed inflation at 2.7%. Core inflation is sitting right around 2.6%.
Wait, didn't the Fed say they wanted 2%?
Exactly.
Progress has basically stalled. Throughout 2025, we didn't really see that final "drop" everyone was hoping for. Cleveland Fed's "nowcasting" models are suggesting that January's numbers won't be much better. When inflation is sticky, the Fed's finger stays off the "cut" button.
The Labor Market Paradox
On one hand, the job market looks decent. Unemployment is hovering around 4.4%.
But if you look closer, there are cracks. Goldman Sachs economists, including Jan Hatzius, have pointed out that job growth for college graduates is actually weakening. For 20-24 year olds with a degree, unemployment has spiked to 8.5%.
- Hiring is mostly to backfill old roles.
- Companies are obsessed with AI-driven "efficiency."
- Wage growth is finally slowing down to "normal" levels.
If the labor market starts to crater, the Fed will be forced to act regardless of what the inflation numbers say. Their "dual mandate" means they have to care about jobs just as much as prices.
Will Fed Cut Rates in the Next Meeting?
The Federal Open Market Committee (FOMC) meets on January 28, 2026. If you're betting on a cut then, you might want to check the odds.
Market pricing currently shows an 85% probability that they do absolutely nothing. Most experts, including those at J.P. Morgan, think the Fed is "done" for a while. Michael Feroli, their chief economist, recently suggested that the next move might not even be a cut—it could be a hike in 2027 if inflation doesn't behave.
That's a wild pivot from the "six cuts" everyone was dreaming of a year ago.
The "Dot Plot" from the December meeting showed a committee that is more divided than a Thanksgiving dinner in an election year. We had a 9-3 vote last time. Some members, like Cleveland Fed President Beth Hammack, are shouting from the rooftops to "wait and watch." Others are terrified that if they don't cut now, the economy will stall out.
Why Your Mortgage Isn't Moving
If you're waiting for that 6.2% mortgage rate to drop to 4%, don't hold your breath. Long-term rates are tied to the 10-year Treasury yield, not just the Fed's overnight rate. Investors are demanding a "term premium" right now. Basically, they're saying, "We don't know what the world looks like in six months, so you're going to have to pay us more to lend you money."
Practical Moves for the Rest of 2026
If you're trying to navigate this, forget the "easy money" era. It's not coming back.
- Stop waiting for the "perfect" rate. If you’re buying a house, a 0.25% Fed cut isn't going to change your life as much as finding the right property will.
- Lock in what you can. If you have high-interest debt, refinance it if you can get a deal now. Waiting for the Fed to "save" you is a risky strategy when they're this divided.
- Watch the June meeting. Most big banks, including UBS and Goldman, have circled June 2026 on their calendars. By then, Powell's term will have expired (May 15), a new Chair will likely be in place, and we'll have a better idea if the "tariff effect" on prices is permanent or just a blip.
The Fed is currently in a "pause and pray" mode. They're praying inflation hits that 2% target so they can cut without looking like they've lost control. Until that happens, the most likely path is a whole lot of nothing.
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Keep an eye on the January 28 decision. While a cut is unlikely, the "Summary of Economic Projections" will tell us exactly how scared—or confident—they really are about the rest of the year.