The Federal Reserve on Wednesday is expected to stop cutting interest rates for the first time since September, holding steady after three consecutive reductions. The harder question is what it would take to start again. The answer depends on which risk materializes first: a job market that breaks, or inflation that convincingly resumes falling toward 2%. Analysts say any rate cut before midyear would likely require deterioration in the labor market because inflation probably won’t fall fast enough to persuade skeptics before then. Meanwhile, Wall Street is on high alert for any signs of a government move to shift the dollar-yen exchange rate, after the Treasury Department took steps on Friday that sparked speculation that it could try to boost the Japanese currency versus the greenback.

The Federal Reserve is likely to make only minor changes to its policy statement Wednesday while keeping its benchmark rate in a range between 3.5% and 3.75%. If officials retain language about considering “additional adjustments” to rates, that would suggest they aren’t ready to signal a longer pause.

Twelve of 19 officials projected in December that at least one more rate cut would be appropriate this year. But the December cut drew dissents from two officials who didn’t support any reduction, and several officials who supported it did so with reservations, according to meeting minutes.

That means the bar for any further reduction is higher. Fed leaders will likely want a stronger consensus than they had in December. Building that consensus will require more convincing evidence that inflation is falling.

Traders are alert to any signs that the U.S. or Japanese governments have actually moved to buy yen in foreign-exchange markets, but it isn’t clear when or if either will follow through. One reason investors care about the dollar-yen exchange rate is that many like to borrow in yen to buy U.S. stocks and other assets. A sharp rebound in the yen could cause them to unwind that trade, leading to declines in U.S. stocks.

The U.S. economy likely expanded at a faster pace in November, according to a delayed indicator published by the Chicago Fed. The Chicago Fed National Activity Index increased to minus 0.04, from minus 0.42 in October. The publication of data for October and November were delayed due to the government shutdown. Three of the four categories that make up the index—production-related indicators, employment-related indicators, and personal consumption and housing—increased on month in November. The sales, orders and inventories category was unchanged. (Dow Jones Newswires)

Texas' factory sector stabilized in January from December, with various indicators in a Dallas Fed survey turning positive. The Texas Manufacturing Outlook Survey's index for general business activity was minus 1.2 in January compared with minus 11.3 in December. The outlook uncertainty index increased to 4.8 but remained well below its average reading. The production index jumped to 11.2 from minus 3. New orders and the employment index also increased. (DJN)

• Trump Threat on South Korea Jolts Trade Partners Who Thought They Had Deals

Time N/A: FOMC meeting begins
8:55 a.m.: Johnson Redbook Retail Sales Index
9 a.m.: S&P Cotality Case-Shiller Indices
9 a.m.: U.S. Monthly House Price Index
10 a.m.: Richmond Fed Business Activity Survey
10 a.m.: U.S. Consumer Confidence Index
12 p.m.: Deutsche Bundesbank President Joachim Nagel speaks at digital euro event
6:50 p.m.: Bank of Japan Monetary Policy Meeting Minutes

7 a.m.: MBA Weekly Mortgage Applications Survey
9:45 a.m.: Bank of Canada interest rate announcement
1 p.m.: ECB Executive Board Member Isabel Schnabel speaks at Women's Network Meeting
2 p.m.: U.S. interest rate decision
2:30 p.m.: Fed Chair Jerome Powell press conference

A frozen Washington is an appropriate setting for a Fed meeting this week that will likely feature central bankers in no hurry to go anywhere fast. "The January FOMC meeting is likely to be uneventful," David Mericle of Goldman Sachs said. Despite their fervent advocacy for cuts at times in 2025, governors Christopher Waller and Michelle Bowman are likely to back the consensus decision to hold rates steady, leaving governor Stephen Miran as the only probable dissenter, Mericle expects. Looking ahead, Goldman's economics team expects two cuts in 2026—but probably no movement until June. (DJN)

Speculation about possible joint U.S.-Japan currency interventions could be raising concerns about a weaker dollar policy, Evercore ISI analysts said in a note. The New York Fed contacted potential trading counterparties on Friday for rate checks, WSJ reported, raising speculation about coordinated U.S.-Japan efforts to boost the yen. The dollar's negative reaction could partly reflect beliefs the Trump administration intends to act on an assumed desire for a weaker dollar more generally, the analysts said. "Co-ordinated FX intervention is rare and sends a strong signal that policymakers on both sides of the FX cross want to see a given FX rate move." (DJN)

This week's Federal Reserve meeting may soon be overshadowed by the fact that President Trump will be nominating his new pick for Fed Chairman in the coming weeks, Navellier & Associates' Louis Navellier says in a note. Since Senate confirmation is required for the new Fed Chairman, Navellier expects a big debate about inflation. "Due to falling rental and home prices, low crude oil prices, plus all the deflation imported from China and weak economies around the world, a serious deflation risk is brewing that would require the Fed to slash key interest rates by at least 1%," he says. (DJN)

The Bank of England is likely to keep rates unchanged and maintain a guarded approach to interest-rate cuts during the Feb. 5 rate decision, HSBC's Elizabeth Martins said in a note. Recent U.K. data releases have been mixed, making it less likely for the BOE to cut rates at the February meeting, Martins said. Jobs data indicate weakness while the interim PMI data for January came in better than expected. The BOE is expected to reiterate what it said in December about taking a gradual downward path of rate cuts, Martins says. (DJN)

• U.S. natural-gas futures topped $6 for the first time since 2022 as a massive winter storm swept across the country, driving up heating demand and threatening supply.
• Spain’s unemployment rate fell at the close of 2025, dropping below 10% for the first time since 2008 as the country’s labor market shows further signs of strength.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by Michael Maloney in New York and Nihad Ahmed in Barcelona.