By Nicole Goodkind

The Federal Reserve will release the minutes of its January meeting Wednesday at 2 p.m. Eastern, offering investors a detailed look at how close -- or far -- policymakers believe they are from cutting rates again.

When officials met in late January, they left the federal-funds rate unchanged at 3.5% to 3.75%, pausing after three rate cuts late last year. Since then, economic data have complicated the outlook. Inflation remains above the Fed's 2% target and employment has somewhat stabilized. Growth, meanwhile, appears solid.

The minutes are expected to show a central bank that believes policy is sufficiently restrictive for now and is in no hurry to ease further. That is a shift from late 2025, when concerns about a weakening labor market helped justify rate cuts.

Economists at Morgan Stanley expect the minutes to reflect growing confidence that the labor market has found a tentative balance. Job creation is running at modest levels, but layoffs remain low. With fewer signs of immediate labor-market strain, policymakers are placing more weight on inflation data in determining the timing of the next move.

Price pressures remain sticky. Both headline and core personal consumption expenditures inflation likely edged higher in December and continue to run above target, according to economists at Comerica Bank. The core consumer price index, which excludes volatile food and energy prices, rose 0.3% in the most recent monthly reading. While services inflation has been slowing, progress has been uneven, and tariff-related price effects are still filtering through the data.

The minutes may shed some light on how policymakers are thinking about tariff-related inflation. So far, Fed officials have said those price increases are likely to be transitory. If that view holds, it lowers the bar for cuts once the broader inflation trends improve. But any indication that officials fear more persistent effects could push back expectations for easing.

Markets, however, are betting that the disinflation trend will resume. Citi analysts say inflation is softer than it was a year ago and that seasonal factors tend to boost January payroll figures before weaker readings in the spring.

Stronger-than-expected January employment data -- payrolls rose 130,000 and unemployment fell to 4.3% -- have reinforced arguments for patience on cuts. Economists expect the Fed to hold rates steady at least until Chair Jerome Powell's term ends in May, unless inflation declines more decisively.

The majority of investors are still betting on a rate cut in June and two to three quarter point cuts before the year ends, according to the CME FedWatch tool.

If the minutes confirm that most officials are comfortable waiting for clearer evidence that inflation is on a sustainable path toward 2%, expectations for a June rate cut could fade. If they suggest that policymakers remain inclined to ease once tariff effects dissipate, market pricing for cuts could build further.

Either way, the January minutes are likely to show that the Fed believes it has time. The question investors hope to answer is how much.

Write to Nicole Goodkind at nicole.goodkind@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 17, 2026 17:31 ET (22:31 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.