If you were hoping that the Federal Reserve would gift investors with a rate cut at the beginning of 2026, the latest news from Washington feels like a cold shower. After the January meeting and a series of speeches from key speakers (Jefferson, Waller, and Bowman), it became clear: the Fed has decided that 'the quieter you go, the further you'll get.'
Inflation: Too stubborn to leave. The main problem at the beginning of the year is that inflation has stopped falling. If at the end of 2025 it seemed that victory over prices was already in the bag, recent data shows an unpleasant plateau-shaped curve. Philip Jefferson subtly hinted in his speech that the economy turned out to be stronger than models predicted. Consumers are spending, businesses are hiring, and prices in the service sector continue to 'bite.'
'Hawks' are spreading their wings. Michelle Bowman, traditionally taking a hard stance, has added fuel to the fire. While Wall Street is guessing when the decline will begin (in June or September?), she reminds us: if inflation shows its teeth, they might raise the rate. This seems like light trolling of optimistic traders, but in this humor lies a harsh truth — the Fed fears a repeat of the mistakes of the 70s when premature easing triggered a second wave of crisis.
Labor market: too good is also bad. The paradox of 2026 is that a strong labor market has become the 'enemy' of the Fed. Low unemployment is great for citizens, but it forces employers to raise wages, which fuels the inflation spiral. Christopher Waller was extremely pragmatic in his speech on January 30: 'We don't need to see the economy fall off a cliff, but we need to see more evidence of cooling.'
January signals tell us one thing: the Fed has once again entered 'stealth-waiting' mode. The regulator is frozen, watching every job report and supermarket checkout. As they joke in the corridors of Powell's agency: 'We will cut rates right after everyone completely stops expecting it.'
In 2026, patience will become the most expensive currency. And it seems that the Fed has much more of this reserve than the financial markets.