Market Pricing Confirms High Odds of Fed Holding Rates Steady in January

ChainSauceMaster · 2026-01-12T20:05:09+00:00

The CME's FedWatch tool indicates strong market confidence in unchanged Federal Reserve rates in January (88.4% likelihood), while by March, there's a notable shift with a 55.4% chance of holding rates steady and a 40.3% chance of a 25 basis point cut.

ChainSauceMaster

2026-01-12 20:05:09

Abstract generation in progress

The CME’s FedWatch tool is currently reflecting trader expectations around the Federal Reserve’s near-term policy path, with new data underscoring the market’s confidence in unchanged rates. As January approaches, the probability landscape shows a clear consensus: an 88.4% odds favoring a hold on current rate levels, leaving just an 11.6% chance of a quarter-point reduction materializing.

Looking further ahead into the first quarter, the confirmation of rate cut odds shifts notably. By March, market participants are pricing in a 55.4% probability that the Fed keeps rates unchanged, while a 40.3% odds reflects growing expectations for a cumulative 25 basis point cut over the period. A more aggressive 50 basis point cumulative reduction carries only a 4.3% likelihood.

The messaging here is telling: while immediate rate hold expectations remain heavily favored through January, the probability of eventual easing does rise meaningfully when extending the forecast horizon to Q1. This shifting pattern suggests traders are hedging between two scenarios—a near-term pause followed by potential accommodation—with the January decision representing the lower confidence cut-off point.

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