Federal Reserve keeps benchmark rate unchanged

"On the economic front, inflation was flat in December, rising 0.3% month over month after seasonal adjustments. Year-over-year inflation growth of 2.7% was unchanged from November. The labor market also continued to cool, with the economy adding just 50,000 nonfarm payroll jobs in December. November's preliminary estimate was revised downward by 8,000 and totaled 56,000 jobs. The Fed is on hold but remains data dependent, Bank of America analysts wrote Monday. The balance of risks around the two mandates hasn't changed much since December."

"Realtor.com senior economist Jake Krimmel said legal and political pressure from the Trump administration, court proceedings and renewed debates over Fed independence rather than any expected policy shifts have dominated the narrative. Still, he said, the central bank has consistently signaled that the road to maintaining credibility requires that policy decisions remain solely data-driven."

"Looking ahead to 2026, market participants expect additional cuts, with some betting they could begin as early as April. Mortgage industry experts, however, expect 30-year fixed rates to remain in the 6% range. Investors are trying to understand the path forward for rate cuts later this year, with only a one-in-three chance of a cut priced in by April and stronger odds pointing toward June or July, Jeff DerGurahian, loanDepots chief investment officer and head economist, said in a statement."

Inflation rose 0.3% month over month in December, leaving year-over-year inflation at 2.7%. Nonfarm payrolls increased by 50,000 in December, with November revised down to 56,000. The Fed is on hold and data-dependent, and risks around its dual mandate remain largely unchanged. Legal and political pressures and debates over Fed independence have influenced the narrative, while the Fed emphasizes data-driven policy to maintain credibility. Inflation remains above the 2% target and the job market shows low-hire, low-fire dynamics. Markets expect further cuts in 2026, while mortgage rates likely stay near 6%.

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