Fed Meeting This Week Expected to Be “Uneventful” as Markets Await Policy Clarity

The Federal Reserve's upcoming policy meeting this week is widely anticipated to maintain the status quo, with interest rate traders assigning a 97% probability that the Federal Open Market Committee will hold the federal funds rate steady at its current target range of 3.50% to 3.75%.

Goldman Sachs Chief U.S. Economist David Mericle has characterized the gathering as “likely to be uneventful,” signaling minimal changes to both monetary policy and the language of the accompanying statement.

The FOMC has already delivered three consecutive rate cuts designed to stabilize the labor market, and Fed Chair Jerome Powell is expected to emphasize that the Committee is now well-positioned to assess the impact of these recent easing measures. This pause in the cutting cycle reflects a data-dependent approach as policymakers evaluate whether the labor market will stabilize as expected throughout 2026.

Goldman Sachs has penciled in the next rate reduction for June, followed by a final cut in September, which would bring the federal funds target to 3.00%-3.25% by year-end. However, the firm notes that if labor market conditions do indeed stabilize as projected, the urgency for further rate cuts would diminish considerably. This cautious outlook aligns with recent inflation data showing consumer prices rose 2.8% year-over-year in November, up from 2.7% in October, with core inflation mirroring this uptick.

Despite elevated prices that remain above the Fed's 2% target, consumer spending grew by 0.5% month-over-month in November, indicating robust economic activity as 2025 concluded. This resilience in consumer demand, combined with inflation that has cooled significantly from its June 2022 peak but remains stubbornly above target, creates a complex backdrop for monetary policy deliberations.

The Fed's decision-making process is occurring against an unprecedented political backdrop. The Supreme Court is set to hear arguments regarding President Trump's attempt to remove Federal Reserve Governor Lisa Cook over alleged mortgage fraud, which she denies. Lower courts have blocked the removal, citing due process violations, but the case raises fundamental questions about the central bank's independence and the potential for politicization of monetary policy.

The combination of steady rates, persistent inflation concerns, and questions about Fed independence creates an environment where even an “uneventful” meeting could carry significant implications for future policy trajectory and market sentiment in the months ahead.