It’s the first Fed day of 2026, and Chair Jerome Powell is in the hot seat.
Central bank leaders will announce their January interest rate decision at 2 p.m. ET. The meeting follows weeks of political pressure from the Trump administration and a recently announced Department of Justice probe.
Business Insider will be covering projections from economists, the Fed decision, and market moves all day. Check back here for updates.
Where the DOJ probe stands
The DOJ probe around Powell’s testimony about the Fed renovations is ongoing. Markets and political leaders will be watching Powell’s comments in this afternoon’s press conference closely. Beyond posting the uncharacteristic video message online to announce the subpoena, he hasn’t spoken publicly about the investigation.
Tariffs are still high, but haven’t pushed inflation up too much
The effective import tariff rate has spiked to the highest in decades.
Experts have been keeping an eye on just how much tariffs have affected inflation. Elizabeth Renter, senior economist at NerdWallet, said it’s challenging to know the extent to which tariffs have had an effect because there are other headwinds, such as supply chain and inventory issues. Jason Draho, the head of asset allocation Americas for UBS Global Wealth Management, said tariffs had some effect on goods inflation, but hadn’t resulted in a massive surge.
The effective import tariff rate has spiked to the highest in decades.
Experts have been keeping an eye on just how much tariffs have affected inflation. Elizabeth Renter, senior economist at NerdWallet, said it’s challenging to know the extent to which tariffs have had an effect because there are other headwinds, such as supply chain and inventory issues. Jason Draho, the head of asset allocation Americas for UBS Global Wealth Management, said tariffs had some effect on goods inflation, but hadn’t resulted in a massive surge.
The Supreme Court has yet to rule on the legality of tariffs imposed by the Trump administration using the International Emergency Economic Powers Act.
S&P 500 hits 7,000 for the first time ahead of rate decision
US stocks cruised to records at the open on Wednesday, with the S&P 500 hitting 7,000 for the first time ever. Traders were bracing for the Fed decision, as well as critical earnings updates from mega-cap tech. Tesla, Meta, and Microsoft are due to report fourth-quarter earnings after the closing bell.
Markets are broadly expecting to rates to remain unchanged today. The CME FedWatch Tool shows 97% odds of the target rate remaining in the range of 3.5-3.75%. Views on Wall Street are also mixed on whether the market can expect one or two cuts in 2026.
US stocks cruised to records at the open on Wednesday, with the S&P 500 hitting 7,000 for the first time ever. Traders were bracing for the Fed decision, as well as critical earnings updates from mega-cap tech. Tesla, Meta, and Microsoft are due to report fourth-quarter earnings after the closing bell.
Markets are broadly expecting to rates to remain unchanged today. The CME FedWatch Tool shows 97% odds of the target rate remaining in the range of 3.5-3.75%. Views on Wall Street are also mixed on whether the market can expect one or two cuts in 2026.
Glen Smith, chief investment officer at GDS Wealth Management, said, “we expect just one rate cut for 2026, and while the timing of this next rate cut is debatable, it will likely come towards the second half of the year” with a new Fed chair.
Inflation remains above the Fed’s target
Fed members can look back at last year’s inflation to inform their coming interest rate decision. The inflation rate, based on the consumer price index, ended 2025 lower than it started but remained above the Fed’s 2% target.
The year-over-year percent change in the shelter index continued to cool from its 2023 peak.
Unemployment has been low but remains above 4%
The unemployment rate has been at least 4% since June 2024, and ended 2025 at 4.4%. This is historically low, but it comes alongside limited vacancies, low hiring rates, and a decline in the number of Americans quitting their jobs or changing roles compared to a few years ago.
Job growth has cooled
Daniel Zhao, the chief economist at Glassdoor, said last year’s job market ended “with a fizzle rather than a bang.” The US added 584,000 jobs in 2025, the lowest since 2003, outside recessions.
Economists and job-market experts told Business Insider that the job market was in a low-fire, low-hire environment, partly due to economic uncertainty and reduced demand after the pandemic recovery and the Great Resignation.
A likely hold
It’s likely Fed leaders will stick to the status quo in January, in hopes that steady rates will push inflation closer to their 2% goal. Affordability is a major concern for American households, as prices rise on housing, groceries, healthcare, and more. Powell has consistently prioritized price stability during his time as chair.
The Fed is expected to cut rates at least once later this year, a move that could ease costs for borrowers and juice the job market.
Would Powell stay?
Powell’s term as chair ends in May, but he’s eligible to remain on the Fed committee until early 2028. It’s rare for former chairs to stay on as governors, and Powell has not indicated his plans.
But there’s been some speculation from Wall Streeters that Trump’s threats to the Fed could entice Powell to remain at the bank longer than expected.
The stakes are high ahead of Trump’s next Fed chair pick
The DOJ probe news sparked alarm among politicians, economists, and business leaders, many of whom are concerned about the future of the central bank. Powell’s term as chair expires in May, and Trump is set to announce his next pick for the role in the coming weeks.
Both Democratic and Republican leaders have signaled the probe jeopardizes the search for Powell’s successor.
The DOJ probe news sparked alarm among politicians, economists, and business leaders, many of whom are concerned about the future of the central bank. Powell’s term as chair expires in May, and Trump is set to announce his next pick for the role in the coming weeks.
Both Democratic and Republican leaders have signaled the probe jeopardizes the search for Powell’s successor.
“If there were any remaining doubt about whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” North Carolina Sen. Thom Tillis said, adding that he will oppose any Trump nominees to the central bank until “this legal matter is fully resolved.”
What’s going on in the markets
With around 7.5 hours until the Fed’s latest rate decision is announced, things are a bit of a mixed bag in financial markets on Wednesday.
As of 6:30 a.m. ET futures for the three major US indexes are trending higher, with the Nasdaq leading the way, signaling a nearly 1% rise at the open. That’s due in large part to its tech focus, with many of the biggest tech firms reporting earnings this week.
With around 7.5 hours until the Fed’s latest rate decision is announced, things are a bit of a mixed bag in financial markets on Wednesday.
As of 6:30 a.m. ET futures for the three major US indexes are trending higher, with the Nasdaq leading the way, signaling a nearly 1% rise at the open. That’s due in large part to its tech focus, with many of the biggest tech firms reporting earnings this week.
Elsewhere, futures for the S&P 500 are 0.4% higher, while the Dow Jones is up less than 0.1%.
In Europe, where markets are open, stocks are a little lower, with the UK’s FTSE 100 benchmark down 0.5%, and Germany’s DAX falling 0.2%.
Gold’s record rally is continuing on Wednesday, with the precious metal extending its gain by another 3% to trade just under $5,300 per ounce. Silver is also higher, gaining 5.4% to trade at $111 per ounce.
All eyes on Powell
Powell posted a video message on January 11 announcing that the Fed received a grand jury subpoena. The Trump administration alleges that Powell committed perjury during a June appearance before Congress, where he discussed renovations to the central bank’s Washington, DC, buildings.
Business Insider obtained a letter Powell privately sent to senators detailing the Fed’s construction plans and budget — the details of which match his testimony. Powell said that the probe, which could result in a criminal indictment, is an escalation of ongoing pressure from the White House.
Powell posted a video message on January 11 announcing that the Fed received a grand jury subpoena. The Trump administration alleges that Powell committed perjury during a June appearance before Congress, where he discussed renovations to the central bank’s Washington, DC, buildings.
Business Insider obtained a letter Powell privately sent to senators detailing the Fed’s construction plans and budget — the details of which match his testimony. Powell said that the probe, which could result in a criminal indictment, is an escalation of ongoing pressure from the White House.
“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,” he said.
Today is the Fed’s first decision of 2026
The Federal Open Market Committee has penciled in one rate cut for the new year. Fed leaders opted for three quarter-point cuts last fall after months of steady monetary policy.
The White House and investors are hopeful for a looser approach to interest rates in 2026. But Powell is in a tough spot: Lower rates could speed up a slow job market, but risk a rise in inflation.
The Federal Open Market Committee has penciled in one rate cut for the new year. Fed leaders opted for three quarter-point cuts last fall after months of steady monetary policy.
The White House and investors are hopeful for a looser approach to interest rates in 2026. But Powell is in a tough spot: Lower rates could speed up a slow job market, but risk a rise in inflation.
CME FedWatch is predicting a near-total chance of a rate hold on Wednesday.