28 January 2026
If you are covering the Federal Reserve’s decision to hold interest rates, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Following several cuts last year and the delayed nature of their impact on the real economy, it makes sense that the Federal Reserve has chosen to hold rates at its first meeting of 2026. This is likely to be a pivotal year for the Fed and its future independence, but for now it is happy to defy the President and keep a lid on future rate cuts.
“The US economy is running hot at the moment, and Trump is likely to keep it that way as we head into the midterm elections towards the end of this year. The inflation outlook, consequently, is worsening and as such the next cut from the Fed looks to be a couple of meetings away at the earliest.
“However, markets remain nervous about the potential for erosion around the Fed’s independence. Trump will soon nominate a successor to Jerome Powell, and a source of friction that has been in place preventing rate cuts will soon be removed. Should Donald Trump get his way and see rate cuts delivered going into November then there is the potential for inflation to spike once again.
“This is already hitting the dollar and should events play out to Trump’s liking, then we could easily see fresh bouts of volatility within bond markets as tax cuts are delivered, spending goes higher and inflation returns as a result. It is likely to be a very eventful year for the Fed, despite today’s business as usual approach.”
