Fed Holds Rates Steady, Trump Picks Kevin Warsh as Next Chair — What It Means for You

Two big Fed stories dropped last week, and both matter for your wallet.

First, the Federal Reserve kept interest rates unchanged at its January meeting. Second, President Trump nominated Kevin Warsh to replace Jerome Powell as Fed Chair.

Here's what you need to know.

The Rate Decision: No Change

At its January 28, 2026 meeting, the Federal Open Market Committee (FOMC) voted to hold the federal funds rate at 3.50% to 3.75%, according to Chatham Financial.

The vote wasn't unanimous — 10 members voted to hold, while Governors Waller and another dissented. But the majority agreed: it's not time to cut yet.

Why? The Fed is balancing two goals:

1. Controlling inflation — still above their 2% target
2. Maximizing employment — the labor market is stable but cooling

Powell has indicated rates are "within striking distance" of where they need to be, but the Fed doesn't want to ease up too quickly and risk reigniting inflation.

Who Is Kevin Warsh?

President Trump announced Kevin Warsh as his pick to replace Jerome Powell when Powell's term ends in May 2026.

Warsh's background:

• Former Fed Governor (2006-2011) — served during the 2008 financial crisis
• Wall Street experience — former Morgan Stanley banker
• Known as a "hawk" — historically cautious about inflation and loose monetary policy
• Critic of recent Fed policy — said the Fed was too slow to fight inflation in 2022 and undermined credibility by cutting rates in 2024 while inflation was still elevated

According to Chatham Financial, Warsh resigned from the Fed in 2011 after publicly pushing back against quantitative easing, citing concerns about balance sheet expansion and long-term inflation risks.

What Does This Mean for Interest Rates?

Here's the twist: despite Warsh's hawkish history, he's expected to support rate cuts in the near term.

Why? Because that's what Trump wants.

"There was no person who was going to get this job who wasn't going to be cutting rates in the short term," David Bahnsen of The Bahnsen Group told CNBC.

Trump has been vocal that rates should be "sharply lower" and that high rates put the U.S. at a disadvantage versus other countries.

The timeline:

• Powell remains Chair until May 2026
• Warsh must be confirmed by the Senate
• If confirmed, Warsh would lead his first FOMC meeting in June 2026

How Markets Reacted

Surprisingly calm, according to Chatham Financial:

• The dollar strengthened modestly
• Rates and stocks remained stable
• No panic selling

Why? Investors view Warsh as independent and institutionally minded — not a "Fed chair lackey" who would undermine the central bank's credibility. That eased fears of political interference.

What This Means for You

Mortgage Rates

Don't expect dramatic changes soon. The Fed holding steady means mortgage rates will likely hover in the current range (around 6%) for the next few months. If Warsh pushes for cuts later this year, mortgage rates could drop further.

Savings Accounts

High-yield savings rates (currently 4-5% APY) will stay attractive as long as the Fed holds. When cuts come, HYSA rates will drop — so lock in now if you can.

Credit Cards & Loans

Variable-rate debt (credit cards, HELOCs) is tied to the Fed rate. No change means no relief yet. If you're carrying balances, focus on paying down debt before rates potentially rise or stay elevated.

Investments

Markets are cautiously optimistic. A Fed that's holding steady (not hiking) is generally good for stocks. The Warsh nomination didn't spook investors, which is a positive signal.

The Bottom Line

The Fed is in "wait and see" mode. Rates are staying at 3.50%-3.75% for now, and Jerome Powell remains in charge until May.

Kevin Warsh will likely be the next Fed Chair, and despite his hawkish history, he's expected to support rate cuts once he takes over — Trump made sure of that.

For now, nothing changes for your finances. But keep an eye on the June FOMC meeting — that's when Warsh (if confirmed) will make his first big move.

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Sources: CNBC, Chatham Financial. Updated February 6, 2026.