Fed holds rates at an unusual moment: Stocks at record highs, dollar under pressure, and Powell in the crosshairs

Federal Reserve Chairman Jerome Powell walks between meetings at the Fed on January 13, 2026 in Washington, DC. (Credit: Chip Somodevilla—Getty Images)

The Federal Reserve on Wednesday held interest rates steady at 3.50% to 3.75%, attempting to project an image of stability as the U.S. financial landscape splits into two jarring realities: a stock market at record heights and a currency under pressure.

The decision, widely expected by 97% of investors, arrived just as the S&P 500 crossed the psychological 7,000-point threshold for the first time in history. But the euphoria in equities—“AMERICA IS BACK!!!” President Donald Trump cried on Truth Social—was matched by a move in the opposite direction for the greenback. The U.S. dollar index (DXY) has shed more than 10% of its value over the past year, sliding further after Trump signaled late Tuesday a multiyear low for the currency was “great.” The U.S. dollar index rebounded slightly on Wednesday as Treasury Secretary Scott Bessent said on CNBC: “The U.S. always has a strong dollar policy.”