Fed Enters a New Holding Pattern on Interest Rates

Summary

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WSJ What’s News PM (Jan 28, 2026): Fed Enters a New Holding Pattern on Interest Rates

Episode Overview

This episode delivers in-depth reporting and expert analysis on three major developments: the Federal Reserve's decision to hold interest rates steady, the rise of billion-dollar AI "Neo Labs" startups with no products or revenue, and significant updates in U.S. immigration enforcement and foreign policy. Hosted by Alex Osola, with contributions from WSJ reporters and columnists.

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Key Discussion Points & Insights

1. Federal Reserve Decision: Rate Pause Amid Uncertainty

• Fed Holds Rates Steady: After three consecutive cuts, the Federal Reserve decided to maintain current interest rates, citing a balanced but still uncertain economic environment.
• Official Tone: Chair Jerome Powell’s statements emphasized reliance on incoming data—especially on jobs, inflation, and industrial sectors—before determining next moves.
• Limited Forward Guidance: Powell declined to clarify potential timing for future rate cuts, maintaining the Fed’s standard cautious language.

Notable Quotes & Analysis

• Jerome Powell [01:32]:

  “The economy is growing at a solid pace. The unemployment rate has been broadly stable, and inflation remains somewhat elevated. So we'll be looking to our goal variables and letting the data light the way for us.”

• Spencer Jacob, WSJ Investing Columnist [01:59]:

  “They’d likely have to see something dramatic or see something elsewhere in the economy... But we have not seen signs of that so far this year.”

• Consensus & Dissent: Two Fed officials (Stephen Myron and Christopher Waller—both Trump appointees and one a candidate for Fed chair) dissented, favoring a rate cut, but overall consensus remains strong.

  “It shows us that it's functioning fairly well because there is consensus... It counts as consensus for any normal meeting.” —Spencer Jacob [02:32]

• Fed Independence & Legal Issues: Powell deflected questions about ongoing Justice Department and Supreme Court cases impacting Fed autonomy, remaining “extremely professional” and focused on economic messaging [03:17].
• Market Reaction: Minimal reaction since the decision was anticipated; however, the US dollar rose after Treasury Secretary Scott Besant reaffirmed a strong dollar policy. The S&P 500 briefly crossed a milestone of 7,000 points before settling flat.

2. Corporate & Market Updates

• Amazon: Announced layoffs of 16,000, with CEO Andy Jassy attributing cuts to a desire to “operate like a startup,” not just cost-cutting. Total job cuts since October reach 30,000.
• Starbucks: Recorded 4% increase in same store sales and 6% revenue growth, though profits fell sharply (down 62%) due to store investments, worker pay, and tariffs.
• Tech Earnings:
  • Tesla: Revenue down 3%; lost global EV crown to China’s BYD.
  • Meta: Record sales and plans for major increased spending, signaling optimism in AI investment.
  • Microsoft: Another strong quarter, driven by OpenAI partnership and growth in cloud computing.

3. The Billion-Dollar AI 'Neo Labs': Product-less, Profit-less, but Booming

• Definition/Trend: Neo Labs are AI-focused research organizations valued at up to $30B, with no commercial product or revenue. Modeled after OpenAI, these labs aim to build better foundational AI technologies.

  • [07:03] “You can think of a Neolab as kind of a mini baby OpenAI. These are a new generation of startups that... are getting their start as purely research labs.” —Kate Clark, WSJ Startups Reporter

• Examples of Notable Neo Labs:

  • Safe Superintelligence: Founded by an OpenAI alum, valued over $30B, focused on safer AI.
  • Thinking Machines Labs: Also an OpenAI spin-off.
  • Flapping Airplanes: Raised over $100M to create AI models requiring less data [07:40].

• Investor Logic: Investors see potential for a “trillion dollar opportunity” if a Neo Lab makes a critical AI breakthrough, echoing bets in OpenAI and Anthropic.

• Speculation & Risk: Despite skepticism and bubble talk, investment is rising even in the absence of products or revenue [08:20].

  “If one of these companies really does figure out a more efficient way... they will have a trillion dollar opportunity on their hands.” —Kate Clark [08:20]

• Talent Retention Challenges: These startups struggle to retain top talent, who are often lured back to established tech giants (OpenAI, Meta) by huge compensation deals.

  “If they can’t keep their talent, they don’t have anything.” —Kate Clark [09:12]

4. National & Global Updates

• Minneapolis Shootings & Immigration Enforcement:

  • Two Border Patrol agents involved in the shooting of Alex Preddy and an ICE officer involved in the death of Renee Goode placed on administrative leave ("standard protocol") [09:47].
  • Heightened backlash to immigration enforcement prompts the Trump administration to shift strategy, appointing Tom Homan as border czar in Minneapolis.
  • Calls rise for Homeland Security Secretary Kristi Noem’s resignation.

• US-Iran Tensions:

  • President Trump issues ultimatum on social media: Iran must negotiate an end to its nuclear program or face potential attack [10:35].
  • Iran firm on its right to enrich uranium and maintain missiles.

• Spain Immigration Policy: Spain announces plan to legalize status for up to 500,000 undocumented immigrants, excluding those with criminal records.

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Notable Quotes by Timestamps

• On AI Excitement Despite Bubble Talk [00:34]:

  “All of this just points back to how much excitement there still is for AI development. Even though there has been more skepticism in the market, there is more talk of a bubble, that has not stopped investment from climbing even into these extremely risky businesses like the NeoLabs.” —Kate Clark

• On Operating Like a Startup [05:36]:

  “Jassy’s said that surge in hiring led to bloat at the company. He's promised to operate like a startup and that means, quote, removing layers.” —Alex Osola

• On Market Reactions [03:28]:

  “The market reaction has been fairly muted. The decision was very widely expected and there was nothing really unexpected that came out of Powell's mouth.” —Spencer Jacob

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Timestamps for Important Segments

• Fed decision analysis: [00:50] – [03:45]
• Corporate/market round-up: [03:45] – [06:04]
• AI Neo Lab overview & analysis: [06:38] – [09:41]
• Immigration, Iran, and Spain policy updates: [09:47] – [11:14]

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Episode Tone

The tone is brisk, informative, and analytical, balancing market context with detailed expert commentary. Humorous moments are minimal, with the focus on clarity and insight.

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This summary delivers the key stories and expert analysis from the Wall Street Journal’s January 28, 2026 PM edition, equipping listeners with the major business, finance, and policy developments of the day.

Transcript

[A]

Hey, it's Ryan Knudsen, host of the Journal Podcast, our show about money, business and power. If you're looking for more deeply reported stories like we share every day, consider becoming a subscriber to the Wall Street Journal. Visit subscribe.WSJ.com TheJournal all lowercase to subscribe now.

[B]

The Federal Reserve holds rates steady and offers little clarity on when it might start cutting again. Plus, a new wave of AI startups are landing billion dollar val even though they don't have a product.

[C]

All of this just points back to how much excitement there still is for AI development. Even though there has been more skepticism in the market, there is more talk of a bubble that has not stopped investment from climbing even into these extremely risky businesses like the Neolabs.

[B]

And two Border Patrol agents who shot Alex Preddy and the ICE officer who shot Renee Goode in Minneapolis have been put on leave. It's Wednesday, January 28th. Alex I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world today. The Federal Reserve held interest rates steady today, entering a new holding pattern after three straight cuts. Officials kept language that's typically suggested an openness to further moves without suggesting any hurry to make them. In a press conference after the decision was announced, Chair Jerome Powell offered little insight into what's next.

[A]

The economy is growing at a solid pace. The unemployment rate has been broadly stable, and inflation remains somewhat elevated. So we'll be looking to our goal variables and letting the data light the way for us.

[B]

For more on the Fed's decision and what went into it, I'm joined now by WSJ investing columnist Spencer Jacob. Spencer Powell said that the Fed chose to keep rates steady as inflation and employment are, at least for the moment, in a sort of balance. What would it take for it to start cutting rates again?

[D]

Well, we'll have a couple of more jobs reports before the March meeting. They'd likely have to see something dramatic or see something elsewhere in the economy. You know, for example, manufacturing surveys could be very soft, industrial production, durable goods orders, things like that. But we have not seen signs of.

[B]

That so far this year among Fed officials. For this month's decision, Powell said there was broad support for cutting, but two officials, both of whom were appointed by President Trump, said that they wanted to cut this time around. What does that show us about how the Fed is functioning as a body?

[D]

It shows us that it's functioning fairly well because there is consensus the two Officials that dissented, each of whom asked for a quarter point cut, were Stephen Myron and Waller, who's one of the four candidates to be Fed chair. You know you're not going to get the job if you're not seen playing ball because Trump is explicitly calling for Fed rate cuts. So no surprise there at all. It counts as consensus for any normal meeting.

[B]

Right. By Waller, you mean Christopher Waller, who's in the running to be the new Fed chair, along with Kevin Warsh, Kevin Hassett and Rick Reeder. But our current Fed chair, Powell, he was asked today about the Justice Department investigation into him and the Lisa Cook case in front of the Supreme Court, both of which could affect the independence of the central bank. How did Powell talk about those things?

[D]

He was asked about it, but he wouldn't be drawn. So he was extremely professional. Did not allow any of that distract from the economic message.

[B]

What has been the market reaction to today's Fed decision?

[D]

The market reaction has been fairly muted. The decision was very widely expected and there was nothing really unexpected that came out of Powell's mouth. He said that they have a dual mandate, full employment and controlling inflation, and that the two are imbalanced and perhaps a bit more benign than they had been in the past.

[B]

That was WSJ investing columnist Spencer Jacob. Thanks, Spencer. Sure. Like Spencer said, markets didn't have a strong reaction to the Fed. But the dollar did climb today after Treasury Secretary Scott Besant said the US Had a strong dollar policy and absolutely wasn't intervening in currency markets. The dollar had sold off yesterday, partly because President Trump said he wasn't concerned about currency declines in round number milestones. The S&P 500 briefly crossed 7,000 points today for the first time, but later retreated. And stock markets finished the day pretty much unchanged from yesterday. The biggest move in the indexes was a 0.2% gain in the Nasdaq. In corporate news, Amazon said it was laying off 16,000 employees. That brings its total cuts to 30,000 workers since October. CEO Andy Jassy has portrayed the cuts as an attempt to reinvigorate the company's culture rather than to cut costs. Amazon went on a hiring spree during the pandemic, adding about 100,000 workers in a short period. And Jassy's said that surge in hiring led to bloat at the company. He's promised to operate like a startup and that means, quote, removing layers. And Starbucks said today that its Same store sales grew 4% and revenue increased 6% in the latest quarter. CEO Brian Nichols says His turnaround strategy is working, but profit declined 62%, taking a hit from those investments in stores and workers and from coffee tariffs. And we have some headlines for big tech earnings that came out after the bell. Tesla's revenue fell 3% as it lost its lead as the world's top electric vehicle maker to China's byd, while Metta said it had record sales and expects a massive increase in projected spending this year, a sign that its AI investments are still going strong. And Microsoft reported better than expected earnings because of its new deal with OpenAI and continued growth in its cloud computing business. For more details, visit WSJ.com and we'll be discussing those results on tomorrow morning's show. Coming up, what's drawing investors to AI startups with no product or revenue and President Trump's ultimatum for Iran. That's after the break.

[E]

Hi, this is Gunjan Banerjee and this is Telus Demos.

[F]

We're reporters at the Wall Street Journal and The hosts of WSJ's take on the Week.

[E]

Take on the Week is a weekly show that gives listeners a leg up in the world of markets and investing.

[F]

From the Fed's moves to bubbles, we dive into the biggest deals, key players and business news ahead.

[E]

If you're looking for more news and tools that can help you navigate the markets, consider becoming a subscriber to the Wall street journal.

[F]

Visit subscribe.WSJ.com take on the week. To subscribe now.

[B]

There's a new kind of startup getting attention in Silicon Valley. These companies don't have any products or any revenue, but they've got eager investors and some of these companies are valued at $1 billion or more. The industry is calling these startups Neo Labs. And Kate Clark, who covers startups for the Journal, says that they're riding the AI wave in a different kind of way. Kate, how do these companies differ from other kinds of AI startups?

[C]

You can think of a Neolab as kind of a mini baby. OpenAI. These are a new generation of startups that like OpenAI, are getting their start as purely research labs. Research that would usually happen inside academic environments. So basically they are trying to build better AI models, better systems of building AI through complicated equations, whiteboarding, coding, and they're not worried about applications of that AI. In other words, they're not really worried yet about actually trying to make any money.

[B]

Can you give us a couple of examples of the names of these companies and how they're thinking about approaching AI?

[C]

Yeah, there are a couple of more well known examples One of those is Safe Superintelligence, which was founded by one of the original founders of OpenAI, and it is focused on building AI more safely. It is valued at over $30 billion, making it one of the most valuable startups. There's also Thinking Machines Labs, which is also founded by an OpenAI alum. And there's a startup I focused on in my story called Flapping Airplanes, which wants to build new AI models with less data. He raised over $100 million to do that.

[B]

These valuations seem quite high and also there's no plan for our products or any kind of revenue anytime soon. Why are investors interested in these neolabs?

[C]

I think the idea for investors is if one of these companies really does figure out a more efficient way or just a better way of building AI systems, that they will have a trillion dollar opportunity on their hands. These are a lot of the same people who have put billions of dollars into OpenAI and Anth and who are absolutely convinced that those companies will be worth a trillion dollars or more in the near future. So they think that if they bet on a bunch of these little companies that also want to disrupt the AI space that they will see massive payday at some point, even if that is a decade down the line. All of this just points back to how much excitement there still is for AI development. Even though there has been more skepticism in the market, there is more talk of a bubble that has not stopped investment from climbing even into these extremely risky businesses like the Neolab.

[B]

And what kinds of challenges do Neo Labs face?

[C]

I think that the big one is retaining the star talent that they have recruited or even keeping on some of the co founders of these companies. We've already seen several examples of big shot researchers who founded these NeoLabs actually leaving pretty quickly to go back to OpenAI or to go to Meta, because they were offered in some cases one 200, $300 million packages to leave. And if they can't keep their talent, they don't have anything.

[B]

That was WSJ reporter Kate Clark. Thanks, Kate.

[C]

Thanks.

[B]

In the latest development after the fatal shootings in Minneapolis, two Border Patrol agents who fired shots at Alex Preddy last weekend have been put on administrative leave, a decision that the Customs and Border Protection Agency says was, quote, standard protocol. And the Department of Homeland Security says the ICE officer who shot and killed Renee Goode earlier this month has also been placed on administrative leave. With the backlash to the aggressive immigration enforcement operation in Minneapolis, the Trump administration has changed its strategy, putting border czar Tom Homan in charge of the operation in the city as Democrats and some Republicans call for Homeland Security Secretary Kristi Noem to step down. President Trump has issued new threats against Iran. Posting on social media today, Trump said that he hopes that Iran will negotiate, negotiate a deal that includes stopping its nuclear program or it will face a possible attack. He said, quote, time is running out. Iran says it won't compromise on its right to continue enriching uranium for civilian purposes or to maintain its missile arsenal. The Pentagon's buildup in the Middle east includes an aircraft carrier with its accompanying warships. And like the US Many countries in Europe are trying to stop or deport migrants. Not Spain, which yesterday said that undocumented immigrants can legalize their status in the coming months. The government estimates that about 500,000 people will gain legal residency, though analysts say it could be more. The plan doesn't apply to every migrant. For example, people with criminal records are ineligible. And that's what's news for this Wednesday afternoon. Today's show is produced by Pierre Biennime, with supervising producer Tali Arbel. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

[E]

Sam.