As part of our initiative to bring timely market information to California public agencies, CalTRUST Chief Executive Officer Laura Labanieh Kitson had a brief Q&A with State Street Investment Management’s Vice President, Portfolio Strategist Will Goldthwait to reflect on this week’s Federal Reserve meeting:
Laura: So… what did the FOMC actually do this time?
Will: True to expectations, the Committee heroically did nothing, holding the policy rate at 3.50%–3.75%. After cutting a cumulative 75bps over their prior three meetings, the Fed appears satisfied that policy is now “appropriate” and “within a range of plausible estimates of neutral,” which in Fed‑speak means “probably fine, and let’s not touch anything just in case.” The 10–2 vote suggests a lively internal debate, though notably one where everyone agrees on the destination (a lower policy rate), just not on whether to get there today, March, April or eventually after more data arrives.
Laura: Why all the talk about “neutral,” and why does it feel like a safe word?
Will: By declaring policy to be within a “plausible range of neutral,” the Fed effectively placed monetary policy in its comfort zone—alert but motionless. Neutral is doing a lot of heavy lifting here: it justifies waiting, watching, and occasionally nodding at incoming data. Meta‑cognitively speaking, neutral is the Fed’s way of saying, “We have optionality, and we plan to use every ounce of it.”
Laura: Did the press conference tell us anything new?
Will: A bit more than nothing, but only by design. Powell reiterated the core themes – progress on inflation though it is still “somewhat elevated,” a labor market that is “stabilizing,” and policy that is not on a preset path. There were no rate-cut timelines, no forward commitments, and no encouragement for markets to price aggressive easing. The message was disciplined restraint: the Fed is patient, data‑dependent, and comfortable waiting for tariff-related goods inflation to pass through before moving again.
Laura: Why did the communication feel so… carefully boring?
Will: Because boring is a feature, not a bug. When uncertainty is high, the Fed defaults to novelty minimization; repeat prior language, avoid fresh angles, and keep the focus squarely on the reaction function. Powell’s remarks hewed closely to September-through-December themes of stubborn goods inflation and a cooling but not collapsing labor market. This is institutional risk management: maintain control, avoid market over-interpretation, and keep expectations well-anchored.
Laura: What’s the real implication for markets and the next phase of policy?
Will: This meeting reinforced the idea that the easing cycle is paused, not over, and that further cuts require evidence, not vibes. The dissents matter less as imminent signals and more as proof that the center of gravity has shifted toward how much easing is appropriate eventually. Powell stressed that inflation must resume a downward trend toward 2% once tariff effects fade, and that the Fed is “well positioned” to adjust policy if the outlook changes. In other words, policy is on standby, markets are back to watching the data, and everyone pretends this was exactly what they expected.
Source: Federal Reserve, Jan 28, 2026