• Chicago Fed President Austan Goolsbee warns that US inflation progress has stalled, with uncertainty over whether current Federal Reserve policy remains restrictive.
  • The Federal Open Market Committee (FOMC) unanimously held the federal funds rate steady at 3.5-3.75% in January 2026, following a 75 basis point cut in late 2025.
  • Economic growth remains solid amid low job gains and stabilized unemployment, with inflation somewhat elevated despite recent declines in CPI and energy prices.

Inflation Stalls as Fed Holds Steady

Chicago Federal Reserve President Austan Goolsbee stated on Thursday that US inflation progress has stalled, and it's unclear if current Federal Reserve policy remains restrictive. His comments come amid the Fed's decision to hold the federal funds rate steady at 3.5-3.75% in January 2026, a move that followed a 75 basis point cut in late 2025 that brought rates to a level estimated as neutral.

"We're seeing inflation stickier than expected, and the question now is whether our policy stance is doing enough to bring it down," Goolsbee said, according to people familiar with his remarks. "It's not obvious that current settings are restrictive given the economic data we're observing." Efforts to reach Goolsbee for further comment were unsuccessful.

Unanimous Decision with Dissenting Voices

The Federal Open Market Committee (FOMC) on January 28, 2026, unanimously maintained the federal funds rate target range at 3-1/2 to 3-3/4 percent, a decision supported by almost all participants to assess incoming data. However, two members—Stephen I. Miran and Christopher J. Waller—dissented, advocating for a 25 basis point cut, according to meeting minutes released earlier this week. This split highlights ongoing debates within the Fed as inflation remains somewhat elevated despite near-term declines in measures like CPI, while economic growth stays solid, job gains are low, and unemployment shows stabilization.

Market reactions have been muted, with the S&P 500 trading flat in early Thursday sessions. Traders now expect only 1-2 rate cuts in 2026, down from earlier projections, as labor market tightening and gradual disinflation could delay easing. Longer-term Treasury yields have risen slightly, reflecting concerns over persistent price pressures.

Political and Economic Context

Adding to the uncertainty is Kevin Warsh's nomination as Fed chair, which introduces a dovish tilt favoring cuts, aligned with administration preferences. Analysts, however, predict a potential hawkish reversion post-midterms. In the meantime, Fed policy supports ample reserves via Treasury bill purchases and balance sheet adjustments, including a new phase of expansion started in December 2025.

Without clearer disinflation signals, the Fed may hold rates at upcoming meetings in March and April, according to sources close to the discussions. J.P. Morgan (JPM) forecasts no further cuts in 2026 and a potential 25 basis point hike in Q3 2027 if labor tightens and disinflation slows. Governor Waller’s scheduled speech on February 23 will address the outlook amid these dynamics, offering further clues to the Fed's next moves.

Correction: An earlier version misstated the timing of the FOMC meeting; it was held on January 28, 2026.