Fed Holds Rates Steady as Capacity Pressures Keep Manufacturers Investing

The Federal Reserve left interest rates unchanged at its first meeting of 2026, keeping the benchmark rate in a 3.5% to 3.75% range, a move markets and manufacturers largely expected.

"With tension between the two sides of the dual mandate and a policy rate nearing estimates of the neutral rate, we can expect the Federal Reserve to proceed cautiously until economic data dictates a clear path," said Christopher Chidzik, principal economist of AMT – The Association For Manufacturing Technology.

According to AMT – The Association for Manufacturing Technology, the steady rate environment continues to support capital investment across manufacturing, especially in machinery and metalworking. Despite the industry slightly underperforming compared to the rest of the economy late last year, machinery production saw a 6% increase in 2025. Capacity utilization among machinery manufacturers also rose for the fourth straight month in December, signaling that shops are running fuller even if they’re not yet at historical limits.

For manufacturers, steady rates will help to bring some short-term clarity, making it easier to finance upgrades and projects and also justify ongoing investments. The continued willingness to spend also points to a healthy downstream demand for manufactured goods.

While the Fed hasn't signaled when rates might change, today's decision suggests that rates will stay static for the time being, barring a major shift in economic conditions. For now, manufacturers can operate with fewer surprises on the financing front as they head further into 2026.

As equipment ordered in late 2025 begins arriving on shop floors, manufacturers should be able to increase output by adding capacity or improving efficiency, rather than pushing existing assets harder. Steady rates, rising utilization in key manufacturing segments, and incoming equipment suggest the industry is set for measured growth through 2026.