Fed January 2026 FOMC Meeting Preview: Roger Ferguson's "Wait-and-See" Assessment

This analysis is based on Roger Ferguson’s appearance on CNBC’s Squawk Box published on January 26, 2026 [1], where the former Federal Reserve Vice Chairman (1999-2006) provided expert commentary on the upcoming FOMC meeting and the ongoing succession battle for the next Fed chair. Ferguson’s assessment arrives at a critical juncture for U.S. monetary policy, as the Federal Reserve faces its most politically charged environment in decades.

The January 2026 FOMC meeting carries heightened significance due to the unprecedented confluence of factors: Chair Jerome Powell’s term expires in May 2026, federal prosecutors have opened a criminal investigation into his leadership, and the Trump administration has taken aggressive actions against the central bank’s independence—including efforts to remove Fed Governor Lisa Cook, which has escalated to the Supreme Court [2][3]. Treasury Secretary Scott Bessent indicated that the Fed chair announcement could come “as soon as next week” [4], adding urgency to the succession discussion.

Current market data reveals cautious optimism among investors as they await the FOMC decision [0]. The S&P 500 closed at 6,955.50 with a 0.47% gain, the NASDAQ finished at 23,638.02 up 0.46%, and the Dow Jones Industrial Average settled at 49,353.60, advancing 0.44%. Treasury yields showed modest movement, with the 10-year Treasury at 4.211% (down approximately 3 basis points) and the 2-year Treasury at 3.59% (down approximately 1 basis point). These indicators suggest markets are pricing in a high probability of a rate hold while remaining attentive to forward guidance.

Traders have priced in two quarter-point interest rate cuts for 2026 [4], reflecting expectations that the Fed will need to calibrate its policy stance amid ongoing economic uncertainty. The Fed cut rates three times during 2025, establishing a baseline for continued accommodation, though the pace and timing of future cuts remain contingent on incoming economic data and the resolution of political uncertainty surrounding the central bank’s leadership transition.

Four candidates are actively under consideration for the next Fed chair position, each representing distinct policy orientations that could significantly influence the direction of U.S. monetary policy [3]:

, BlackRock’s Chief Investment Officer of Global Fixed Income, brings extensive market expertise and institutional investor perspective. His background in bond markets and risk management could signal continuity with the Fed’s current data-driven approach while potentially emphasizing market stability.

, Director of the National Economic Council, represents the closest alignment with the Trump administration’s economic priorities. His appointment would likely signal greater coordination between fiscal and monetary policy, potentially introducing new dynamics to Fed decision-making.

, current Federal Reserve Governor, offers institutional continuity and deep understanding of the Fed’s policy framework. His established relationships with other FOMC participants and proven track record could provide stability during the transition period.

, former Federal Reserve Governor (2011-2017), brings prior central banking experience and market credibility. His previous tenure and subsequent private sector experience provide a unique perspective on balancing policy objectives with market expectations.

The political pressure on the Federal Reserve creates a complex feedback loop affecting multiple dimensions of market functioning. First, the criminal investigation into Chair Powell introduces legal and procedural uncertainty that could constrain the Fed’s ability to make independent policy decisions [2]. Second, the Supreme Court’s involvement in the Cook removal case establishes precedent that may reshape the governance structure of the Federal Reserve system. Third, the timing of the chair announcement—potentially before the FOMC meeting—introduces market timing risk as investors attempt to position for different policy scenarios.

The interrelationship between political developments and market expectations has intensified volatility in interest rate markets, with bond yields reflecting both the expectation of accommodation and the uncertainty surrounding policy continuity. This dynamic creates challenges for market participants attempting to forecast the Fed’s trajectory.

The current environment represents an unprecedented stress test for Federal Reserve independence. The combination of a criminal investigation into the sitting chair, executive branch pressure on governing board members, and the pending succession selection creates a situation without modern precedent. Ferguson noted that the Fed faces a delicate balancing act—maintaining credibility and independence while navigating political pressures that have intensified in both scope and directness.

The implications extend beyond the immediate policy decision. If the Fed appears to capitulate to political pressure, long-term credibility effects could influence inflation expectations and the effectiveness of future monetary policy. Conversely, if the Fed maintains its independent stance, it risks confrontation with an administration that has demonstrated willingness to use executive authority to challenge institutional norms.

With only three FOMC meetings remaining in Powell’s tenure (January, March, and May), the transition period may introduce elevated market volatility as investors assess the policy preferences of potential successors [2]. Each candidate represents different equilibrium points on the policy spectrum, and markets will need to calibrate expectations accordingly. The compressed timeline amplifies the importance of signals from the upcoming press conference and any nominee announcement.

Despite political pressures, structural factors suggest substantial policy continuity. The FOMC’s institutional processes, the professional staff’s analytical frameworks, and the collective decision-making structure provide buffers against sudden policy shifts. However, the composition of the Board of Governors and potential changes to the Committee’s voting rotation could influence policy direction in the medium term.

remains elevated and represents the most significant concern for market participants. The criminal investigation into Chair Powell and efforts to remove Governor Cook introduce legal and procedural uncertainty that could affect decision-making dynamics at upcoming meetings [2][3]. Markets should monitor the scope and trajectory of these developments carefully.

stems from the compressed timeline for selecting and confirming a new Fed chair. If the nomination process extends beyond Powell’s term expiration, acting leadership arrangements could introduce additional uncertainty regarding policy continuity and market messaging.

may increase as markets struggle to price the probability of different policy scenarios under potential successors. This uncertainty typically manifests as increased volatility in rate-sensitive assets, including equities in rate-sensitive sectors and fixed income markets.

exists around Powell’s press conference, where questions about the investigation and political pressure could force responses that either reinforce or undermine market confidence in Fed independence.

remains viable for investors who believe institutional processes will prevail over political pressure. Historical analysis suggests that Fed policy transitions typically maintain substantial continuity even during leadership changes.

may become viable as markets digest political developments and policy signals. Options markets in interest rate futures and equity indices may misprice tail risks during high-information periods.

arise from the uncertainty premium currently embedded in Treasury yields. Investors with longer time horizons may find attractive entry points in fixed income if yields rise on political concerns.

: The FOMC decision and Powell press conference represent the highest-priority events, with potential for significant market movement depending on policy signals and responses to political questions.

: The Fed chair announcement, expected “as soon as next week” per Treasury Secretary Bessent, will likely dominate market attention and could trigger sector rotations based on candidate policy orientations [4].

: Confirmation hearing dynamics, Supreme Court rulings on governance issues, and the trajectory of the criminal investigation will maintain elevated uncertainty levels through the transition period.

The January 2026 FOMC meeting is widely expected to result in a hold on the federal funds rate, with the focus shifting to the accompanying statement and Chair Powell’s press conference for signals on the policy trajectory. Roger Ferguson’s characterization of a “wait-and-see” meeting aligns with market consensus and reflects the Fed’s data-dependent approach amid elevated uncertainty [1][5].

• Current Chair
  : Jerome Powell (term expires May 2026)
• Announcement Window
  : “As soon as next week” per Treasury Secretary Bessent
• Remaining FOMC Meetings
  : January, March, May
• Confirmation Process
  : Senate Banking Committee hearings following nomination

Recent economic indicators suggest the Fed has achieved substantial progress on its dual mandate. Labor market conditions remain solid, inflation has moderated from peak levels, and economic growth continues at a moderate pace. These factors support the market expectation of steady rates with potential accommodation later in the year.

The Trump administration has taken multiple actions affecting Federal Reserve operations: the criminal investigation into Powell, efforts to remove Governor Cook (Supreme Court pending), and public commentary on monetary policy direction. These developments have introduced political risk premiums into market pricing and elevated concerns about institutional independence.

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[1] CNBC - Roger Ferguson Squawk Box Interview

[2] Reuters - Fed meeting likely to be overshadowed by threats to central bank’s independence

[3] New York Times - Federal Prosecutors Open Investigation Into Fed Chair Powell

[4] Bloomberg - Bessent Says Fed Chair Pick Could Come as Soon as Next Week

[5] Kiplinger - January Fed Meeting: Live Updates and Commentary