The Minutes from the Federal Open Market Committee (FOMC) January 27–28 meeting showed that almost all participants favoured holding rates steady, with only a couple preferring a cut. The pause, however, did not close the door on easing. Several policymakers reportedly said further rate cuts would likely be appropriate if inflation declined in line with their expectations.

At the same time, the Committee made clear it is not operating with a one-way bias. Several participants said they would have supported describing future decisions in more two-sided terms, reflecting the possibility that hikes could be appropriate if inflation remained above target. In other words, the reaction function remains flexible.

On inflation, officials continued to anticipate a move back toward the 2% objective, but acknowledged uncertainty around the pace and timing. Most participants warned that progress could prove slower and more uneven than expected and judged the risk of inflation running persistently above target as meaningful.

Growth, by contrast, was described as solid. Participants observed that economic activity appeared to be expanding at a firm pace and generally expected that strength to carry into 2026. The staff outlook was upgraded relative to December, with slightly higher inflation projections and unemployment seen declining gradually from 2026. The vast majority judged that labour market conditions were stabilising and that downside risks had diminished.

Market take

For markets, the Minutes read as cautiously balanced rather than dovish. The Fed is prepared to cut if disinflation resumes, but it is equally wary of declaring victory too soon. With growth holding up and inflation risks still alive, the hurdle for rapid easing looks high.

Bottom line

The Fed is on hold, but not on autopilot. Further cuts remain conditional on cleaner inflation data, while the possibility of tightening has not been ruled out entirely. For the US Dollar and yields, this keeps policy expectations anchored within a narrow, data-dependent range rather than pointing to an aggressive easing cycle.

Market reaction

The Greenback keeps pushing higher, motivating the US Dollar Index (DXY) to extend its recent break above the 97.00 barrier and flirt with the area of two-week highs, all accompanied by a decent rebound in US yields across different maturities.

This section below was published as a preview of the FOMC Minutes of the January 27-28 meeting at 18:15 GMT.

• The Minutes of the Fed’s January 27-28 monetary policy meeting will be published on Wednesday.
• Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.
• Markets see virtually no chance of a rate cut in March. 

The Minutes of the United States (US) Federal Reserve’s (Fed) January 27-28 monetary policy meeting will be published on Wednesday at 19:00 GMT. The US central bank decided to leave the policy rate unchanged at the range of 3.50%-3.75%, but Fed Governors Stephen Miran and Christopher Waller voted to lower the fed funds rate by 25 bps.

Jerome Powell and company opted to pause rate cuts in January

The Federal Open Market Committee (FOMC) held the interest rate unchanged in January after opting for three consecutive 25 basis points (bps) rate cuts. In the policy statement, the Fed noted that the unemployment rate has shown some signs of stabilisation but reiterated that it will remain attentive to risks to both sides of the dual mandate.  

In the post-meeting press conference, Fed Chairman Jerome Powell adopted a neutral tone, saying upside risks to inflation and downside risks to employment have both diminished. “I think it's hard to look at incoming data and say the policy is significantly restrictive and may be loosely neutral, or somewhat restrictive,” he added. 

Previewing the Fed’s publication, BBH analysts said, “the minutes should underscore that the Fed is in no rush to resume easing.” 

“Look for additional color on why the FOMC dialed back concerns over downside risks to employment. Recall, at that meeting the FOMC voted 10-2 to keep the target range for the Fed funds rate unchanged at 3.50-3.75%. Fed Governors Stephen Miran and Christopher Waller voted for a 25bps cut,” they added.

When will FOMC Minutes be released and how could it affect the US Dollar?

The FOMC will release the Minutes of the January 27-28 policy meeting at 19:00 GMT on Wednesday. 

According to the CME FedWatch Tool, markets virtually see no chance of a rate cut in March and price in about a 25% probability of a 25 bps reduction in April. This market positioning suggests that the US Dollar (USD) doesn’t have a lot of room on the upside, even if the publication reaffirms that policymakers are likely to prefer another policy hold next month. 

Nevertheless, the USD could gather strength against its rivals if the document shows that officials could refrain from easing the policy in case the labor market shows signs of improving. The US Bureau of Labor Statistics announced last week that Nonfarm Payrolls (NFP) rose by 130K in January, compared to the market expectation for an increase of 70K, and the Unemployment Rate edged lower to 4.3% from 4.4% in December.

Conversely, the USD could come under bearish pressure if the publication highlights growing confidence in further easing in price pressures among policymakers. In this scenario, markets could reassess the probability of a rate cut in April, given the fact that the latest data showed the Consumer Price Index (CPI) inflation softened to 2.4% in January from 2.7% in December.  

TD Securities analysts said that the January FOMC Minutes will likely show the wide dispersion of views on the Committee about the future policy path. “While most view rates slightly above neutral, some participants likely saw a high bar for further easing this year. In line with dissents, a couple participants likely called for cuts at this meeting,” they added.

Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for the USD Index:

“The Relative Strength Index (RSI) indicator on the daily chart rose to the 50 region, reflecting a diminishing seller interest. Additionally, the USD Index climbed above the 20-day Simple Moving Average (SMA).”

On the upside, the 50-day SMA aligns as the first resistance level at 98.00 ahead of 98.45-98.60, where the 100-day and the 200-day SMAs converge. In case the USD Index clears that latter resistance area, it could face the next resistance at 99.00 (round level). Looking south, the first support level could be spotted at 96.50 (static level) ahead of 95.50 (static level).”