Voting Results of 10 to 2: The Federal Reserve presses the pause button, and the rare dissenting votes from two governors hint at a powder keg of policy divergence in the market.
In the first monetary policy meeting of 2026, the Federal Reserve decided to maintain the benchmark interest rate in the range of 3.5%-3.75% with a voting result of 10 to 2. This marks the first time the Federal Reserve has held steady in this cycle after three consecutive rate cuts in the second half of 2025.
The monetary policy statement indicates that the Federal Reserve removed previous references to rising risks in the job market while emphasizing that inflation "remains slightly high." The two dissenting votes came from Federal Reserve governors Milan and Waller, both advocating for an immediate 25 basis point rate cut.
I. Meeting Resolution
● In the early hours of January 29, 2026, the Federal Reserve announced the resolution of its first monetary policy meeting of 2026. The FOMC decided to keep the federal funds rate target range unchanged at 3.50% to 3.75%.
● This decision was passed with a voting result of 10 in favor and 2 against. In the policy statement, the Federal Reserve noted that economic activity continues to expand at a robust pace, and signs of stabilization are evident in the job market.
● Regarding inflation, the Federal Reserve emphasized in the statement that it "remains slightly high" and reiterated that uncertainty about the economic outlook is at a high level. Compared to the statement from December 2025, the Federal Reserve removed previous references to rising risks in the job market.
II. Dissenting Vote Signals
The most notable aspect of this meeting was the two dissenting votes. Federal Reserve governors Milan and Waller both voted against maintaining the interest rate, advocating for an immediate 25 basis point cut.
● Before the Federal Reserve's decision was announced, the "Federal Reserve mouthpiece" indicated that Waller's voting position was under special scrutiny. As one of the candidates considered by Trump to replace Powell as Federal Reserve Chair, his voting action carries political symbolic significance.
● Analysts have provided different interpretations of these two dissenting votes. Pimco's global economic advisor Richard Clarida and Apollo analyst Torsten Slok believe that this move is more of a data-driven literal interpretation rather than a political consideration.
III. Logic Behind the Pause in Rate Cuts
● The Federal Reserve's decision to pause rate cuts reflects a change in its assessment of the economic outlook. The adjustments in the policy statement indicate that concerns about a rapid decline in the labor market have eased.
● The logic behind the three rate cuts by the Federal Reserve in 2025 has shifted from inflation to employment, and with signs of stabilization in the job market, the pause in rate cuts is supported by data. The Federal Reserve pointed out in the statement that it will consider the timing and magnitude of future rate adjustments "based on the latest data, changing economic outlook, and risk balance."
● Regarding inflation, some officials, including Powell, expressed greater confidence that the price increases caused by tariffs are no longer viewed as a persistent phenomenon, expecting these increases to be temporary.
IV. Policy Outlook and Game Theory
The Federal Reserve did not provide a clear timetable for when to resume rate cuts. Market analysis suggests that the next rate cut may not occur until after Powell's term ends.
● The Federal Reserve's policy in 2026 is expected to exhibit characteristics of "moderate easing in the first half and differentiation with the change of leadership in the second half." It is believed that during Powell's term, the policy will maintain a moderately accommodative tone in the first half.
● Data from the interest rate futures market shows that traders expect about a 28% probability of a rate cut in April, while the probability of a rate cut in June rises to 64%. This change in expectations reflects the market's belief that the Federal Reserve needs more economic data to support further rate cut decisions.
V. Crypto Market Waiting
● The impact of Federal Reserve policy on the crypto market has become a focal point. Currently, the cryptocurrency fear and greed index has remained in the "extreme fear" zone since December 13, 2025.
● Owen Liu, Managing Director of Clear Street, stated that the Federal Reserve's interest rate decision is "one of the key catalysts in the cryptocurrency space for 2026." If the Federal Reserve continues to cut rates, retail and institutional investors will be more inclined to venture into the cryptocurrency market.
● Looking back at the market response to the three rate cuts in 2025, Bitcoin soared to a historic high of $125,100 on October 5 after the first rate cut in September, but then fell sharply. As of the time of writing, Bitcoin's price has dropped 29.3% from its historical peak.
VI. Future Uncertainties
Powell's term will end in May 2026, and the change in Federal Reserve Chair will become a key variable affecting policy direction.
● Potential successors of interest to the market include Federal Reserve governor Waller and White House Council of Economic Advisers Chair Hassett. If Waller is elected, his strong independence will make the policy more aligned with economic fundamentals; if Hassett is elected, the market has strong expectations of his "leaning towards White House demands."
● Guosheng Securities analysts point out that early 2026 may be an important window, as more economic data will be released, and Trump will nominate a new chair, whose statements will have a significant impact on the market. At that time, there may be intense competition over "easing expectations," and asset price volatility may increase.
After the resolution was announced, the dollar index briefly strengthened, and U.S. stocks showed limited volatility. OIS contracts linked to the Federal Reserve meeting indicate that the market is betting on a cumulative rate cut of about 45 basis points by the end of 2026.
The crypto market remains in a state of "extreme fear," with Bitcoin's price hovering around $88,000. Analysts state that mere interest rate adjustments are insufficient to drive a new bull market; catalysts such as regulatory clarity and accelerated institutional adoption are also needed.
The biggest suspense left by the Federal Reserve in its policy statement is: "In considering the timing and magnitude of future adjustments to the federal funds rate target range, the committee will carefully assess the latest data, the evolving outlook, and the balance of risks." This sentence has become the most crucial monetary policy code for global markets in 2026.
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