The Federal Reserve held interest rates steady in a range of 3.5%-3.75% in its first meeting of the year, as widely expected.

The decision was not unanimous, and two Federal Open Market Committee officials dissented. Federal Reserve governors Stephen Miran and Chris Waller voted to cut interest rates by 25 basis points.

The Fed has signaled it will go meeting by meeting in 2026 to determine the policy path after the Fed cut interest rates in the previous three meetings. Divisions over the path for inflation and the labor market have dominated recent FOMC meetings, with officials in December voting against the Fed's 0.25% rate cut in both directions.

At the December meeting, officials projected just one interest rate cut in 2026.

Meanwhile, questions over Fed independence loom over the January meeting and press conference.

The Supreme Court heard oral arguments in the case over President Trump's attempt to remove Fed governor Lisa Cook from her role earlier this month, and Wednesday's announcement marked the first since the Justice Department's criminal investigation into Fed Chair Jerome Powell was disclosed. Trump is also expected to name his pick for Powell's successor to lead the central bank in the coming days.

Follow along for the latest updates.

Federal Reserve Chair Jerome Powell on Wednesday touted Fed governor Lisa Cook's case before the Supreme Court as \\"perhaps the most important legal case in the Fed's 113-year history.\\"

“That case is perhaps the most important legal case in the Fed's 113-year history,\\" Powell said, when asked why he attended the hearing last week. \\"As I thought about it, I thought it might be hard to explain why I didn't attend.\\"

The case on whether President Trump could remove Lisa Cook from her role is considered a major test of the central bank’s independence and could reset precedent. Powell has also faced pressure after the Department of Justice opened a criminal investigation into him and the Fed.

The Federal Reserve Act currently mandates that the president can only remove a Fed governor \\"for cause.\\"

On Jan. 21, the Supreme Court heard arguments over an emergency request from Trump to overturn an injunction blocking Cook's removal. In comments during an interview in Davos with CNBC, Treasury Secretary Scott Bessent criticized Powell's appearance as overtly political.

“I actually think that’s a mistake, because if you’re trying not to politicize the Fed, for the Fed chair to be sitting there trying to put his thumb on the scale is a real mistake,” Bessent said during the interview with CNBC.

Fed Chair Powell suggested a consensus formed in the Federal Open Market Committee in the January meeting to hold rates steady, despite two dissenting votes by Fed governors Stephen Miran and Chris Waller.

\\"There was broad support on the committee for holding today,\\" Powell said, reiterating his phrase from the December meeting that the central bank is \\"well positioned\\" to view incoming data meeting by meeting.

Powell also stated earlier that he views policy as \\"loosely neutral\\" or \\"somewhat restrictive.\\"

\\"Many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time,” Powell said. “It may be sort of loosely neutral, or it may be somewhat restrictive. You know, it's in the eye of the beholder, and of course, no one knows with any precision.\\"

On the evening of Sunday, Jan. 11, Fed Chair Jerome Powell issued a surprising statement saying a Department of Justice probe into his testimony given to Congress in the summer of 2025 was an \\"unprecedented action.\\"

Powell added, \\"The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.

\\"This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.\\"

As expected, Powell was asked about this on Wednesday, with The Wall Street Journal's Nick Timiraos doing the honor. And, as expected, Powell essentially declined to comment.

\\"I'm simply going to refer you to the statement that I made on January 11th. I'm not going to expand on it or repeat it,\\" Powell said.

Asked in a follow up whether the Fed had responded to subpoenas from the DOJ, Powell said, \\"I have nothing for you on that today.\\"

Fed Chair Powell addressed why he attended the Supreme Court hearing on Fed governor Lisa Cook's firing in the first question-and-answer exchange of the press conference.

“That case is perhaps the most important legal case in the Fed's 113-year history,\\" Powell said. \\"As I thought about it, I thought it might be hard to explain why I didn't attend.\\"

The case on whether President Trump could remove Lisa Cook from her role is considered a major test of the central bank’s independence and could reset precedent. Powell has also faced pressure after the Department of Justice opened a criminal investigation into him and the Fed.

\\"I thought it was an appropriate thing,\\" Powell reiterated about why he attended the hearing.

Chair Powell says he attended Lisa Cook's SCOTUS hearing because \\"that case is perhaps the most important legal case in the Fed's 113-year history.\\" pic.twitter.com/H7CwLd7Mh4

— Yahoo Finance (@YahooFinance) January 28, 2026

Fed Chair Powell has begun speaking after the Federal Reserve kept interest rates unchanged.

\\"The US economy expanded at a solid pace last year and is coming into 2026 on a firm footing, while job gains have remained low, the unemployment rate has shown some signs of stabilization, and inflation remains somewhat elevated in support of our goals,\\" he said in his opening remarks.

Watch the press conference live:

Former Cleveland Fed president Loretta Mester said she will be watching the press conference closely for updates on the labor market and for the Fed's thinking on what could lead to another rate cut.

With the policy rate near neutral, in her view, Mester said deterioration in the labor market would likely be the catalyst for another cut.

\\"It'll have to be something in the labor market, or more confidence that the labor market is really stabilized and inflation is on that downward path,\\" Mester told Yahoo Finance. \\"But they're already near, very near, or close to neutral.\\"

Mester also stated that clear communication by Fed Chair Powell and the next Fed chair about the rationale behind the Fed's policymaking will be key to preserving Fed independence.

The Fed's policy statement accompanying its interest rate announcement was little changed, though a couple of things stood out: The central bank upgraded its assessment of the US economy, saying it was expanding at a \\"solid\\" pace. It also removed a reference to job-market risks, a signal that it is watching both sides of its dual mandate — employment and inflation — equally closely.

Here's a look at the key part of the statement. (Additions are bolded, subtractions are in strikethrough text.):

Available indicators suggest that economic activity has been expanding at a moderate solid pace. Job gains have slowed this year remained low, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. s shown some signs of stabilization. Inflation has moved up since earlier in the year and remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.

US stocks and Treasurys were little changed in reaction to the Federal Reserve's interest rate announcement, which came as no surprise to the markets.

The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) briefly dipped but were roughly flat. The Nasdaq Composite (^IXIC) rose slightly and was up 0.1% as investors awaited Fed Chair Powell's remarks.

The 10-year Treasury yield (^TNX) rose 3 basis points to 4.26%. Gold (GC=F) was up 3% on the day.

Bitcoin (BTC-USD) also climbed, up 1.4%, but did not see a major move on the policy announcement.

The obvious questions that Chair Powell will face Wednesday will be around his decision to both disclose, and forcefully speak out against, the ongoing DOJ investigation into Powell's testimony given to Congress last summer. If his response to questions about Trump's power to remove him is any preview, however, Powell will likely be terse.

The most pressing policy-related question facing Powell will be what could prompt the central bank to resume rate cuts, if the labor market has \\"shown some signs of stabilization\\" and the current level of inflation appears on the central bank is comfortable with, to an extent.

And the third is how the central bank is — or isn't — thinking about the impacts of AI on the economic outlook. The AI buildout has certainly been a driver of GDP growth, and there are signs that labor productivity is also accelerating. The impact of the data center buildout is also starting to be more marked in credit markets.

Late last year, the current even Powell spent the most time tying to Fed policy was immigration, which made the labor pool smaller and kept a lid on hiring. This year, we think his attention turns to the AI boom.

As has been the case over the last several meetings, Wednesday's decision from the Federal Reserve to keep interest rates unchanged was not a unanimous decision.

Federal Reserve Governor Stephen Miran, who joined the Fed's Board of Governors in September, voted in favor of a 0.25% cut. He was joined by Fed Governor Chris Waller in that vote.

This also marked the first time since Miran joined the Board in September that he did not vote for a 0.50% rate cut. Miran was appointed to a temporary seat on the Board after Adriana Kugler resigned in August; his term is set to expire on Saturday.

At its December meeting, three officials voted against the Fed's decision to cut rates by 0.25%. Those disagreements marked the first time since Sept. 2019 that officials voted against the Fed's policy decision on both sides of the argument.

Waller, who has voted in favor of rate cuts back when the Fed was holding rates steady in early 2025, had not voted against the Fed's decision to cut rates since July.

The Federal Reserve on Wednesday voted to keep interest rates unchanged, with the target range for its benchmark interest rate remaining in a range of 3.5%-3.75%.

This marked the first time since July the Fed did not vote to lower interest rates at the conclusion of its two-day policy meeting.

Two officials — Fed Governors Stephen Miran and Chris Waller — both voted to cut rates by 0.25%.

In its statement, the central bank wrote:

Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.

Bank of Canada governor Tiff Macklem warned on Wednesday that an erosion of Federal Reserve independence wouldn't just be a problem for the US — it would inc uncertainty around the world.

The Federal Reserve \\"is the biggest, most important central bank in the world, and we all need it to work well,\\" Macklem told reporters after Canada's central bank opted to keep its interest rates steady at 2.25% on Wednesday, as expected. \\"A loss of independence of the Fed would affect us all.\\"

Macklem's comments come as the US Department of Justice has opened an investigation into Fed Chair Jerome Powell, the Trump administration attempts to oust Fed governor Lisa Cook, and as trade tensions between the US and Canada have ratcheted up, with President Trump floating a 100% tariff rate on Canadian goods.

Macklem said that the trade disputes have already caused \\"structural damage\\" to Canada's economy ahead of the renegotiation of the US-Mexico-Canada (USMCA) trade agreement this year. He echoed a recent speech by Canadian Prime Minister Mark Carney, saying that \\"days of open rules-based trade with the United States are over.\\"

On the monetary policy front, Macklem stated that Canada's financial markets are deeply intertwined with those in the US, so a loss of Fed independence \\"would particularly affect us.\\"

\\"Keeping the Fed operating independently, it's good for Americans, it's good for Canadians,\\" he added.

Read the latest updates about the Bank of Canada's interest rate decision.

With Federal Reserve Chair Jay Powell set to approach the dais on Wednesday to discuss the central bank's latest interest rate decision, investors remain focused on updates around who President Trump may nominate to take his place.

With a self-imposed deadline of January set to come and go with no update, reports in the last 24 hours suggest the administration is not quite settled on its nominees. And this despite the pool of potential replacements having been largely set for months.

A report from Bloomberg on Wednesday noted BlackRock executive Rick Rieder — the current betting market favorite, according to odds from Polymarket — has made political donations in the past to candidates including Pete Buttigieg and Trump's GOP rival Nikki Haley.

In a separate report, The Wall Street Journal detailed how each of the four finalists for the Fed role — which include Kevin Warsh, Kevin Hassett, and Chris Waller — have flaws when measured against Trump's clear preference for lower rates and the market's desire for the Fed to maintain its independence.

The Journal also noted that Trump naming a nominee in mid-February \\"would be well within the historical norm for announcing a new chair to replace an incumbent.\\"

Yahoo Finance's Jennifer Schonberger reports:

With the Federal Reserve widely expected to hold interest rates steady Wednesday afternoon, all eyes are on Fed Chair Jerome Powell’s press conference and what clues he provides about when the central bank could cut rates again.

Numerous signs point to not anytime soon.

After making three rate cuts at the end of last year to address concerns over the job market and absorbing more economic data since their last meeting, several Fed officials have signaled a near-term pause, saying “policy is in a good place.”

Matt Luzzetti, chief economist for Deutsche Bank, said he expects officials will “send a strong signal that with the policy rate now within the range of Fed officials’ estimates of neutral, the committee is well positioned to respond to risks to either side of their dual mandate should incoming data warrant an adjustment.”

Krishna Guha, head of global policy and central banking strategy at Evercore ISI, said he thinks the central bank is setting up for an “extended pause.”

“Powell will underscore policy is 'well-positioned' with no urgency to cut again soon,” he said. “Powell will say the FOMC would consider cutting in the months ahead if the labor market weakens materially further. But unless that happens — we think it will not — the Fed will be on hold for the balance of his term as chair that ends in May.”

Read more here.

US stock futures diverged on Wednesday ahead of the Federal Reserve's decision.

Contracts on the tech-heavy Nasdaq 100 (NQ=F) climbed about 0.8%, while S&P 500 futures (ES=F) rose 0.2%. Those on the Dow Jones Industrial Average (YM=F) fell below the flat line.

Treasurys were stable. The 10-year yield (^TNX) hovered at 4.22%, while the 30-year yield (^TYX) rose 2 basis points to 4.83%. The 5-year yield (^FVX) stood at 3.81%.

Investors have been closely watching the recent drop in the dollar, which has continued to fall despite expectations that the Fed would pause interest rate cuts. On Tuesday, President Trump said the \\"dollar’s doing great,\\" shrugging off concerns about the decline.

The dollar index (DX-Y.NYB), which measures the greenback against a basket of currencies, declined to 96.17

President Trump is expected to announce his nomination for the next Fed chair any day, and his eventual pick is unlikely to significantly alter the Fed's existing policy path, BofA Securities senior US economist Stephen Juneau said.

\\"They're probably all supportive of cutting rates more than maybe the current Fed led by Powell is, and cutting rates relatively quickly to, say, a 3% level,\\" Juneau said of the leading candidates for the job.

Fed Governor Kevin Warsh, Fed Governor Chris Waller, and BlackRock's Rick Rieder are seen as the frontrunners for the Fed chair position. National Economic Council director Kevin Hassett is also in the running, though his odds have diminished after President Trump said he'd like to keep Hassett in his current role.

All four candidates have expressed that they'd support further rate cuts, he continued. \\"So ... in terms of the general dynamic, it doesn't change all that much in terms of direction of policy.\\"

Trump selected Jerome Powell to lead the Federal Reserve in 2017, but the president has increasingly criticized Powell for not slashing interest rates by as much as he would like. Powell's term expires in May.

Juneau also stressed that the Fed chair has just one vote and does not set policy alone.

\\"The composition of the Fed may not change all that much other than getting a new Fed chair, so it's really going to depend on what the committee's read of the economic conditions is, and how do you get a majority view in terms of setting policy rates,\\" Juneau said. \\"That's really going to always come down to economic fundamentals, economic activity, inflation, the labor market.\\"

Yahoo Finance's Ivana Pino writes:

Although the Fed’s rate doesn’t directly impact the interest rates set by individual banks for consumer deposit accounts and loans, they are closely correlated. When the Fed raises its rate, for example, interest rates on deposit products — including savings accounts and CDs — also tend to go up. And when it lowers its rate, deposit interest rates generally fall.

... In its last meeting, the committee cut the target range for the federal funds rate to 3.5%–3.75%. Though another rate cut is unlikely this week, it's not possible to predict the Fed's next move. And experts believe that the Fed will cut its rate again at some point this year.

If the Fed does decide to lower the federal funds rate again, CD rates will soon start dropping. However, if you open a CD in the next few days, you will lock in today's higher rates on your balance and continue earning that higher rate even as deposit rates go down.

Should the Fed decide to keep rates the same, it won’t have a direct impact on CD rates, which means now is as good a time as any to open an account and take advantage of historically high interest rates. As it stands, the best CD rates today hover around 4% and up.

Read more here.

Fed Chair Powell will almost certainly be asked about AI when he takes the podium on Wednesday.

\\"The impact to labor market inflation is going to be so key for central bankers to try and navigate when it comes to their policy decisions,\\" Principal Asset Management chief global strategist Seema Shah told Yahoo Finance on Tuesday, adding, \\"Certainly, that's a part of the narrative.\\"

Shah explained that while it's still too early for the Fed to start factoring AI into its policy decisions, the technology is something that the Fed and other central bankers will be researching.

In the third quarter, US productivity growth surged to 4.9%, boosting US GDP growth and prompting some economists to point to artificial intelligence as behind the rise. But it's still quite difficult to measure how much of an effect AI is having in the aggregate.

At the same time, AI productivity gains could also pose a risk for the economy in the short term.

\\"If that AI boost to productivity is so significant that it causes job loss, that could be a problem for 2026,\\" Moody's Analytics chief economist Mark Zandi told Yahoo Finance.

At the December policy meeting, Fed Chair Powell stated that the implication of AI would be higher productivity growth, and he also mentioned that he hasn't seen evidence of AI showing up in layoffs yet. But Powell emphasized that it's still \\"early days.\\"

After cutting interest rates in the final three meetings of 2025, the Federal Reserve is expected to hold off on further changes to the fed funds rate on Wednesday.

In 2025, Fed officials were divided on whether to cut rates to boost the cooling labor market or keep rates elevated to continue to bring down inflation to the central bank's targeted 2% level. A government shutdown that delayed and distorted government data on the economy only complicated matters.

But now, as Yahoo Finance's Jennifer Schonberger previously reported, several prominent members of the Fed have stated that they view policy as being “in a good place.”

An unexpected decline in the unemployment rate put the Fed on course to keep rates steady. In December, the unemployment rate ticked down to 4.4% while the US added 50,000 jobs, according to Labor Department data.

Recent readings on inflation haven't swayed the Fed from that course.

According to the latest Personal Consumption Expenditures Index, the Fed's preferred measure, core inflation rose 2.8% year over year for a combined October and November period. The PCE report was a stale reading due to government shutdown delays. Core inflation measured by another index, the Consumer Price Index, remained at a sticky 2.6% in December.

While inflation remains higher than the central bank would like, it has only moderately grown in recent months. Plus, some officials, such as New York Fed president John Williams, believe inflation will continue to come down after the \\"one-off\\" effects of tariffs wear off.

With another government shutdown looming, the Fed could be entering another (partial) data fog. Still, markets will be listening to Fed Chair Powell's speech closely for any changes to the economic outlook and policy path.

Following three interest rate cuts in 2025, the Federal Reserve is back in its wait-and-see mode, Yahoo Finance's Hal Bundrick writes. Current thinking, as measured by federal funds futures trading, puts the next rate cut no sooner than June.

What does that mean for the savings rates and interest charges that affect your money? Bundrick writes that 2026 continues the long stretch of modest earnings on deposit accounts.

For checking accounts, the convenience of liquidity limits your earning power. The national average of interest paid on checking accounts has barely budged much this year and remains at 0.07%.

Interest rates on savings accounts are only marginally better, remaining at 0.39%. But savings accounts are for near-term money.

High-yield savings accounts have been more effective at paying interest. Rates are still barely clinging to 4%, with some financial providers slightly above or below that.

This is one category where rate shopping really pays off. Especially as interest rates move lower.

Read more here.