The Federal Reserve Meeting Starts Today—Here’s What You Need to Know

Introduction to the Federal Reserve’s Decision

The Federal Reserve is set to conclude its first meeting of 2026 on Wednesday, and it is expected to hold interest rates steady. Investors and economists alike will be listening for any updates from Chair Jerome Powell on President Donald Trump’s ongoing efforts to intimidate the central bank to slash interest rates.

What to Expect from the Meeting

The Fed will likely pause its interest rate cuts on Wednesday, but analysts are watching for any hints that it will resume later this year. The Fed lowered interest rates three times in late 2025 to boost a weakening job market. Now, however, the labor market seems to be stabilizing, and strong consumer spending continues to fuel economic growth. Markets are forecasting a delay in any potential 2026 cuts—and will look to Fed Chair Jerome Powell for validation of those views.

Impact on Interest Rates

The Federal Reserve’s fed funds rate influences a wide range of interest rates, including those on credit cards and certificates of deposit. Powell isn’t expected to say much new on the Fed’s rate plans for the year, but he might offer a slight indication that the Fed may cut rates again, providing little guidance on when.

Hawks Versus Doves

The Fed’s 19-member committee was unusually split in 2025, with dissents from hawks arguing against rate cuts and from doves seeking more aggressive action. Recent economic data have “tilted a bit more toward the hawks,” which bolsters the case for Wednesday’s pause in rate cuts. Employment growth remained sluggish in December, but the unemployment rate slipped to 4.4%. Last year’s government shutdown ended up having “no visible impact on real consumer spending growth,” and retail sales rose sharply before the holidays.

A Data Surprise

Investors have reacted to the sunnier prospects by delaying their expectations for the Fed’s next cut. A March rate cut seemed like a coin flip a month ago, but traders now see only a 16% chance of that. Some economists now anticipate the Fed may not cut rates at all in 2026—or at least wait until the second half of the year. The shift to more hawkish market pricing “creates risks of a dovish surprise,” if Powell’s remarks lead investors to swing back to betting on more cuts.

Politics Takes Center Stage

All the economic questions may be overshadowed by President Donald Trump’s attempts to reshape the central bank. Trump has repeatedly slammed the Fed for not cutting interest rates more quickly, arguing that high borrowing costs hold back the economy. The tensions reached a new high this month, with Powell pushing back on Department of Justice subpoenas relating to the Fed’s headquarters renovations.

Trump’s Attacks on the Fed

Trump has also sought to fire Fed Governor Lisa Cook, citing still-unresolved allegations of mortgage fraud, which would open up a seat at the Fed for Trump to fill. At a hearing last week, Supreme Court officials were skeptical that he could fire Cook and raised concerns that the Fed might lose its independence to make policy decisions. Powell attended the Supreme Court hearing. Having weighed in already, it’s not clear whether Powell will say more on the topic on Wednesday.

Conclusion

In conclusion, the Federal Reserve’s decision to hold interest rates steady is expected, but the meeting will be closely watched for any hints of future rate cuts. The Fed’s decision will have a significant impact on interest rates, and investors will be looking for any indication of future changes. The ongoing tensions between the Fed and President Trump will also be a major focus, with Trump’s attempts to reshape the central bank and Powell’s pushback against his attacks. As the economy continues to grow, the Fed’s decisions will be crucial in determining the direction of interest rates and the overall health of the economy.