U.S. FOMC Meeting Minutes (January 27-28, 2026)

FOMC members saw risks tilting towards inflation in January

• The Federal Reserve Open Market Committee (FOMC) held the federal funds rate at a target range of 3.50% to 3.75% in January.
• The minutes showed that the committee is still concerned about inflation remaining above 2%.  Participants noted that elevated inflation readings seemed to be largely due to core goods inflation, which appeared to have been boosted by tariffs, and they continue to expect these effects to diminish later this year. But most participants "cautioned that progress towards the Committee's 2 percent objective might be slower and more uneven" than previously expected, and saw meaningful risk of inflation running persistently above target. 
• With respect to the labor market, participants noted that recent data suggested "labor market conditions may be stabilizing after a period of gradual cooling". Participants nonetheless noted that while layoffs remained low, hiring also remained low, and several participants noted business contacts expressing caution in hiring decisions. Most participants also noted that while downside risks to the labor market remained, they had diminished since the last meeting. 
• Participants generally agreed that economic growth would remain solid in 2026 but felt that uncertainty about the growth outlook was high, as was the case in the prior meeting's minutes.  
• The vast majority of members "judged that downside risks to employment had moderated … while the risk of more persistent inflation remained". Moreover, some commented that these risks had come into better balance from before. Several participants also cautioned that easing rates in the current context could imply diminished commitment to the 2 percent inflation objective.

Key Implications

• The minutes offered two critical insights into the Committee's thinking. First, the balance of risks has shifted away from concerns about labor market weakness, and more towards concern about inflation remaining persistently elevated. We would note that this shift in the Committee's assessment came before last week's delayed payrolls data, which would strengthen the assessment that downside risks to the labor market are not as significant as they seemed in December. Second, those voting in the majority (all but two members) generally agreed that the Committee's current policy rate was closer to neutral rather than restrictive, diminishing the impetus for further rate cuts. 
• All in all, the minutes from January's meeting have thrown a little cold water on hopes for more expeditious rate cuts from the Federal Reserve. We continue to expect the Committee to remain on pause this quarter as the data calendar catches up from the shutdown, and the picture of labor market risks and the persistence of inflation both become clearer.

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