Fed holds rates steady as DOJ investigates Powell and Trump searches for successor

The Federal Reserve announced on Jan. 28, 2026 that it would hold the federal funds rate at 3.5-3.75%, its first decision of 2026. Markets had priced in a 97% probability of no change.

The Fed cut rates three times in late 2025. The Dec. meeting saw three dissents: Governor Stephen Miran pushed for a deeper 50 basis point cut, while Chicago Fed President Austan Goolsbee and 🌻Kansas City Fed President Jeff Schmid preferred to hold steady.

The Justice Department served Fed Chair JPJerome Powell with a subpoena seeking information on the Fed's renovation of its 🌲Washington headquarters. Powell called the probe a pretext for Trump's desire to pressure the Fed on rate decisions.

The Supreme Court heard oral arguments earlier in Jan. on whether President Trump can remove Fed Governor Lisa Cook from her position. The case could determine how much control presidents have over independent agencies.

Governor Stephen Miran's term expires on Jan. 31, 2026, adding to leadership uncertainty. Miran was the only member who voted for a larger rate cut in Dec..

President Trump is expected to name his choice for Powell's successor within days. Leading candidates include Kevin Hassett, Christopher Waller, Kevin Warsh, and BlackRock CIO RRRick Rieder.

The meeting occurs amid a potential government shutdown, with Congress facing deadlines on spending bills. Fed operations would continue regardless of a shutdown.