What Will the Fed Do at Its Next Meeting?

Federal Reserve Chair Jerome Powell speaking at podium after FOMC meeting on May 1

The Federal Reserve will keep short-term interest rates unchanged when it concludes its next meeting, experts say, as solid economic growth, moderating inflation and a "low-hire, low-fire" labor market support current policy.

Of more interest is how Fed Chair Jerome Powell handles the press conference following the release of the central bank's policy statement. The Fed's independence has come under question, and Powell is set to preside over just two more meetings before his term as Fed chief ends on May 15. While Powell could remain on the Fed board for the remainder of his full term, he could also choose to step aside entirely.

As for the state of the economy, fourth-quarter gross domestic product (GDP) is tracking at a strong growth rate of 5.4%, according to the Federal Reserve Bank of Atlanta's GDPNow model.

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Meanwhile, the jobs market remains sluggish but steady. As for inflation, while it's still above the Fed's long-term target, recent readings have come in better than expected. Fears of a tariff-driven surge have thus far proven unfounded.

Matthew Luzzetti, chief U.S. economist at Deutsche Bank, suggests Powell’s press conference could veer into "non-economic issues," such as current threats to the Fed's independence. On the "fundamental" side, Luzzetti expects Powell to describe policy as "well positioned," as it is plausible to argue that rates are currently neutral.

"Powell might also sound somewhat more sanguine on the labor market, while still emphasizing downside risks," Luzzetti adds.

As of this writing, market participants expect the Fed's rate-setting committee, the Federal Open Market Committee (FOMC), to stand pat on the federal funds rate.

Indeed, as of January 26, interest rate traders assigned a 97% probability to the FOMC keeping the target rate steady at 3.5% to 3.75%, according to CME Group's FedWatch.

With the Fed set to leave rates unchanged at an increasingly complex time, we turned to economists, strategists and other experts for their thoughts on monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.

Fed rate decision: what the experts say

"After three straight rate cuts last year, the Federal Reserve is widely expected to keep interest rates unchanged at the next meeting. We may see another dissent (in favor of an additional cut) from Governor Miran before his term ends on January 31, but the real focus will be on Chair Powell's press conference. Investors want to know whether this will simply be a one-meeting 'pause' or the beginning of a longer hold. Right now, the economy still looks surprisingly sturdy." – Larry Adam, chief investment officer at Raymond James

"We expect the Fed to hold rates steady and present a somewhat more upbeat view about the economy through the policy statement and Chair Powell's press conference. The statement is likely to upgrade the growth assessment to 'solid,' note tentative evidence that unemployment has stabilized, and hint at an improving balance of risks to the outlook." – Matthew Luzzetti, chief U.S. economist at Deutsche Bank

"Markets are now not really expecting a Fed rate cut until June, or the first meeting after Jay Powell has left the Chair. We remain a bit more dovish than the market, expecting three quarter-point trims this year. True, real GDP growth expectations are being lifted, but it's coming from better productivity, and the job market remains sluggish while core inflation is stable to lower." – Douglas Porter, chief economist at BMO Capital Markets

"We don't expect to learn a lot at the January FOMC meeting. The Fed is on hold but remains data dependent. The balance of risks around the two mandates hasn't changed much since December. Chair Powell's press conference might be dominated by questions about politics rather than policy. On the latter, however, market pricing creates risks of a dovish surprise." – Aditya Bhave, U.S. economist at BofA Securities

"We expect no policy change in the January meeting. Our base case anticipates 25 to 50 bps of additional easing this year, moving towards neutral and generally supporting our constructive economic and market outlook." – Lauren Goodwin, chief market strategist at New York Life Investments

"While no change in interest rates is expected, markets will be highly attentive to the tone of the statement and Chair Powell's press conference. Any adjustment in how the Fed characterises inflation, labour market conditions or downside risks to growth could quickly influence rate-cut expectations. A message that reinforces patience and acknowledges cooling momentum would likely support equities and pressure the dollar, while a more cautious or hawkish tilt could revive volatility across risk assets." – Daniela Hathorn, senior market analyst at Capital.com

"We expect the Federal Reserve to hold rates steady at the January FOMC meeting, following three consecutive rate cuts in 2025, as policymakers take time to assess the impact of past easing. Assuming inflation continues to trend lower and growth remains resilient, we see room for moderate rate cuts in 2026." – Gargi Chaudhuri, chief investment and portfolio strategist at BlackRock

"The FOMC is widely expected to leave the fed funds rate unchanged at its January meeting. We expect the post meeting statement and press conference to signal maximum flexibility as the Committee strives to keep its options open. Our forecast remains for two 25 bps rate cuts at the March and June meetings, but the risks to our forecast look increasingly skewed toward later and possibly less easing this year." – Sarah House, senior economist at Wells Fargo

Dan Burrows is Kiplinger's senior investing writer, having joined the publication full time in 2016.

A long-time financial journalist, Dan is a veteran of MarketWatch, CBS MoneyWatch, SmartMoney, InvestorPlace, DailyFinance and other tier 1 national publications. He has written for The Wall Street Journal, Bloomberg and Consumer Reports and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among many other outlets. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about markets and macroeconomics.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade individual stocks or securities. He is eternally long the U.S equity market, primarily through tax-advantaged accounts.