Several Federal Reserve officials discussed the possibility of raising interest rates at their January meeting, according to minutes released February 18 — a reversal that would push personal loan rates even higher at a moment when many borrowers were counting on relief.
The minutes from the January 27-28 Federal Open Market Committee meeting show that some participants “would have supported a two-sided description of the Committee’s future interest rate decisions, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels.” Translation: rate hikes are back on the table, not just rate cuts. The FOMC voted 10-2 to hold the benchmark rate steady at 3.5% to 3.75% at that meeting, but the internal division was sharper than the headline number suggests.
The committee split into three distinct camps: those who want to cut, those who prefer to hold, and a contingent openly preparing for hikes. Central Banking reported that the projections reflected some of the starkest disagreements seen among FOMC members in recent years.
For personal loan borrowers, the stakes are direct. Most unsecured personal loans carry fixed rates, but those rates are priced off the broader interest rate environment at the time of origination. Lenders set their floors and ceilings based on where they expect borrowing costs to go. When the Fed signals it may tighten rather than ease, lenders adjust — and not in borrowers’ favor.
The rate environment heading into 2026 had already left personal loan APRs elevated. After three consecutive 25-basis-point cuts in late 2025 brought the federal funds rate from 4.25% down to the current 3.5%-3.75% range, many borrowers expected further relief. Those expectations are now significantly less certain. The CME Group FedWatch tool currently places the earliest probability of a cut at the June meeting at best, and markets pulled back even those modest bets after the minutes dropped.
The broader economic backdrop explains the committee’s hesitation. Inflation came in at 2.4% annually in January 2026 — its lowest level since May — but core inflation, which strips out food and energy, still sat at 2.5% year-over-year. That’s above the Fed’s 2% target, and CNBC noted that Treasury yields ticked higher immediately after the minutes were released, with the 10-year yield rising more than 3 basis points to 4.087%. That kind of market reaction filters through to consumer lending rates within weeks.
Fed Chair Jerome Powell, whose term expires in May, has acknowledged that a “one-time increase” in consumer prices tied to tariff pass-through is expected to work through the economy by mid-year. But the minutes suggest not everyone on the committee is confident thatthe dynamic stays one-time. “Most participants cautioned that progress toward the Committee’s 2 percent objective might be slower and more uneven than generally expected,” the document states.
The nomination of Kevin Warsh — a historically hawkish voice — as Powell’s likely successor adds another layer of uncertainty for borrowers. Wall Street analysts have flagged Warsh’s track record of favoring tighter policy, though his exact positioning on current conditions remains untested.
For anyone carrying variable-rate debt or planning to borrow in the next few months, this shift in tone matters. Personal loans taken out at today’s rates may look far more favorable six months from now if rate hikes materialize. Borrowers who have been waiting for rates to fall before consolidating credit card debt or financing a major purchase should weigh that calculus carefully. The best personal loans available right now from online lenders still offer meaningfully lower APRs than most credit cards, particularly for borrowers with credit scores in the mid-700s or above.
What should borrowers actually do? First, lock in a fixed rate now if you’re planning to borrow — rates are not guaranteed to fall, and the minutes make clear they could rise. Second, check your rate before assuming you know what you qualify for. Lender floors vary significantly, and your credit profile, debt-to-income ratio, and loan term all affect the final number. Tracking personal loan rates across multiple lenders takes less than ten minutes and can surface options that differ by several percentage points.
The next FOMC meeting is scheduled for March 18-19. Between now and then, the Fed will receive February jobs data, the February CPI report, and the core PCE print — all of which will shape whether the rate hike conversation stays theoretical or starts looking like policy. If inflation refuses to cooperate, the conversation in those minutes could turn into action faster than markets currently expect
