The US Federal Reserve (Fed) released the minutes of its Federal Open Market Committee (FOMC) meeting held on January 27-28, 2026, today (February 18, 2026). The minutes revealed that Fed officials expressed conditional optimism about resuming interest rate cuts, but stressed the need for inflation to remain permanently downward. Many officials indicated that further downward adjustments to the federal funds rate target range would be "likely appropriate" if inflation continues to fall as expected. The minutes stated, "Several participants commented that further downward adjustments to the federal funds rate target range would likely be appropriate if inflation falls in line with expectations." However, a majority of committee members cautioned that the disinflation process (the rate of decline in inflation) could be slower and more uneven than anticipated. Stronger-than-expected economic activity and a stabilizing labor market reinforced the tendency to postpone interest rate cuts. Some officials even considered the possibility of an interest rate hike if inflation fails to permanently reach the Fed's 2% target. According to the minutes, "several participants" argued that upward adjustments to interest rates could be considered if inflation remains above the target, and requested that the policy statement be "two-pronged" (including the possibility of both a cut and an increase).

At its January meeting, the Fed decided to keep the federal funds rate stable at 3.50% - 3.75%, following three rate cuts in the final quarter of 2025. Two members (Christopher Waller and Stephen Miran) opposed the decision, calling for a 25 basis point cut.
Markets showed a limited reaction after the release of the minutes. According to CME FedWatch Tool data, investors expect two rate cuts in 2026; the first in June and the second in September. However, the cautious tone in the minutes and the discussion of rate hikes were interpreted as potentially delaying expectations of rate cuts. As Federal Reserve Chairman Jerome Powell emphasized in his January press conference, the committee will continue to "carefully assess incoming data, the evolving outlook, and the balance of risks." With the PCE price index, a key indicator of inflation, still hovering about 1 percentage point above the 2% target, strong economic growth and AI-driven productivity increases are complicating the disinflation process. Experts say that while it is highly likely that interest rates will remain unchanged at the Fed's next meeting (March 17-18, 2026), any positive surprise in inflation data could open the door to rate cuts.
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