Market Minute: January 28, 2026 - Fed Holds Rates as Markets Hit Records and Consumer Confidence Slumps
The S&P ticked above 7,000 for the first time and is currently at 6,972. Gold and silver continue to grind higher as the U.S. dollar sits at its lowest level in four years.
The Fed made a call on rates today and kept interest rates unchanged at 3.50%–3.75% at their January 2026 meeting, pausing after three straight cuts in late 2025. The decision reflected steady inflation, a stabilizing labor market, and heightened political and institutional pressures.
One point we think is key is the view on the labor market. Most recently, the labor market has been weakening. If the Fed’s assessment of a stabilizing jobs market is not correct, more economic uncertainty may be on the horizon.
Key Takeaways from the Fed Decision
The key points from the Fed decision are that the federal funds rate was held at 3.50%–3.75%, ending a streak of three consecutive 0.25% cuts made in late 2025. The vote was not unanimous, as two Federal Open Market Committee members voted for a 0.25% cut.
Why the Fed Paused
The Fed paused because Inflation remains above the 2% target but has not worsened. Further, the labor market is exhibiting signs of stabilization, with low but steady job gains. On the heels of Amazon’s announcement to cut 16,000 jobs, it will be interesting to see if other large employers view this as cover to engage in their own headcount reduction programs. The Fed also held rates steady because economic activity is expanding at a solid pace, reducing the urgency for further cuts.
Political and Institutional Backdrop
It is important to note that political pressure and institutional scrutiny (including a DOJ investigation into Chairman Jerome Powell) created an unusually tense backdrop. As we review the early reports from the Fed meeting, it is important to consider the internal Fed dynamics. Officials are split on the path forward, with some arguing policy is near neutral and others wanting more easing in order to protect the employment market. One of the hallmarks of the current Fed is that they are data dependent, and this was manifested in their signal to take a meeting-by-meeting approach for 2026.
Consensus seems to be coalescing around two or three rate cuts this year. One reason we do see likely Fed action is that yesterday the Consumer Confidence Index fell sharply, dropping 9.7 points to an index level of 84.5, the lowest reading since May 2014. This decline reflected worsening views of both current economic conditions and future expectations, driven by high prices, a cooling labor market, and elevated policy uncertainty.
Within the Consumer Confidence Report, we learned that the index fell to 84.5 from a revised 94.2 in December. This 9.7-point drop was sharper than economists expected (consensus forecast: 90.9).
Looking Ahead
On a forward-looking basis, the Present Situation Index fell 9.9 points to 113.7, indicating worsening assessments of business and labor market conditions. Further, the Expectations Index also declined, reflecting growing pessimism about the economic outlook.
What we are seeing is that high prices continue to pressure household budgets, and the unsteady and varied views on the labor market are reducing confidence in job stability. When these factors are combined with elevated policy uncertainty, consumers are experiencing broader economic anxiety.
Some analysts are projecting that the Federal Reserve may resume cutting interest rates later in 2026 in response to weakening consumer sentiment and economic conditions.
These next few months will be critical because we will either see stability in the employment market, which may induce economic confidence, or we will see the complete opposite. Stay tuned!
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