Federal Reserve's interest rate cut plan undergoes major adjustments: January probability drops to only 5%, and two rate cuts in 2026 are postponed by half a year

The Federal Reserve’s pace of rate cuts is showing a clear shift. According to the latest news, market expectations for a rate cut by the Fed in January have fallen to 5%, indicating that a pause in rate cuts is now almost certain. Meanwhile, the two rate cuts expected in 2026 have been pushed back to June and September, respectively, delaying previous forecasts by several months. This change reflects complex signals from the U.S. labor market.

Contradictions and Balance in Employment Data

In December, the U.S. employment market showed a subtle “low hiring, low layoffs” state. On one hand, the unemployment rate unexpectedly fell to 4.4%, breaking the previous upward trend, which is a positive signal for the economy. On the other hand, the number of new jobs added continues to slow, and subsequent annual revisions may further lower the figures.

This contradictory data provides the Fed with a reason to pause rate cuts. Guotai Haitong research reports that, since the unemployment rate has not risen further and most employment indicators still show low risk of a slowdown, the Fed still has room to pause after three consecutive rate cuts.

Repricing of Rate Cut Expectations

CME data shows that the market’s pricing for a rate cut in January is very cautious. This reflects investors’ full awareness of the Fed’s policy shift and indicates that current employment data is sufficient to support the decision to keep rates unchanged.

Liquidity Test in the Crypto Market

Against this macro backdrop, Tether’s actions are quite noteworthy. According to related information, Tether issued an additional $1 billion USDT this week, part of a total issuance of $3.75 billion USDT and USDC over the past seven days. Stablecoin trading volume hit a record of $33 trillion in 2025, reflecting ongoing market demand for liquidity.

This liquidity injection may indicate market adaptation to the delay in rate cuts. With the Fed pausing rate hikes and tariffs remaining uncertain, traders are cautious about potential volatility, and the increased issuance of stablecoins provides liquidity support for this cautious stance.

Key Catalysts Moving Forward

The announcement of the new Fed chair will become an important policy signal. According to reports, Trump has decided on his candidate for the next Fed chair and is expected to announce it this month. The new chair’s statements could significantly influence market expectations for the pace of rate cuts in 2026.

This is why research reports emphasize that the main catalysts for a renewed increase in rate cut expectations will be the appointment and statements of the new Fed chair. Different chairs may bring different policy inclinations, directly impacting liquidity expectations in the crypto market.

Summary

The shift from continuous rate cuts to a pause by the Fed reflects a reassessment of the resilience of the U.S. economy. The 5% probability of a rate cut in January essentially locks in a pause, while the two rate cuts in 2026 have been pushed back to the later stages of the year, meaning markets need to adapt to a longer period of high interest rates. For the crypto market, this transition brings liquidity pressures but is alleviated by increased stablecoin issuance like Tether. The real variable lies in the policy stance of the new Fed chair, which will determine whether future rate cut expectations will be adjusted again.