Markets price in a January Fed pause after the latest rate cut

Just days after the most recent rate cut, markets are increasingly betting that the U.S. Federal Reserve will leave policy unchanged at its January meeting. According to CME’s FedWatch Tool, traders assign a 75.6% probability to the Fed holding the target federal funds rate steady, while the odds of a cut stand at 24.4% and expectations for a hike are virtually zero.

Fed Chair Jerome Powell said members of the Federal Open Market Committee broadly agree that inflation remains too high and needs further cooling, while the labor market has eased and faces additional risks. The real disagreement, he noted, lies in how policymakers balance those risks and assess the outlook, not in the diagnosis itself.

Powell stressed that no one on the committee is pushing for a rate hike. Instead, views are split between those who believe the Fed is at the right level and should pause, and others who see room for one or more rate cuts this year and next. Despite his careful wording, markets largely interpreted Powell’s remarks as hawkish.

Prediction markets reinforce the same conclusion. On Kalshi, the “no rate change” outcome for January is priced at around 79%, far ahead of a 25-basis-point cut at 22%. Polymarket shows similar odds, with a roughly 78% chance that the Fed keeps rates unchanged. Taken together, futures markets and prediction platforms point to a January meeting defined by patience rather than policy shifts, with investors firmly expecting the Fed to hold the line.