• At the FOMC meeting on January 27-28, 2026, the Fed is expected to maintain its interest rate at 3.50-3.75 percent. This is driven by a resilient US economy and inflation that is not accelerating, although it remains above the target. Meanwhile, the Fed may prefer to closely monitor economic and inflationary developments amid elevated uncertainty in the period ahead.
• In 2026, KResearch expects the Fed to gradually reduce the policy rate two to three times, with these rate cuts likely to be deferred to 2H26, as the economy is forecasted to slow significantly during that period.
• In addition, the nomination of the next Fed Chair still needs to be closely monitored. President Donald Trump is expected to announce a nominee as early as the end of this month, ahead of Jerome Powell’s term expiry in May 2026. Meanwhile, a criminal investigation involving Jerome Powell allegedly misleading Congress over the Fed’s building renovation budget has been launched, creating renewed political pressure. However, this is not expected to directly affect the Fed’s monetary policy decisions.
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