Market Expectations Shift: January Fed Rate Cut Odds Plunge Below 20%

Market sentiment regarding near-term monetary policy has undergone a dramatic reversal. According to the latest CME “FedWatch” data released on December 22, traders have dramatically scaled back their bets on early rate relief from the Federal Reserve. The odds of a 25 basis point rate reduction in January have collapsed to 19.9%, with the probability of unchanged rates standing at a commanding 80.1%.

This represents a sharp reversal from just one week prior, when January rate cut expectations reached 31%. The sudden shift signals growing conviction among market participants that the central bank will maintain its current stance heading into 2026.

Looking further ahead, the path for monetary easing remains highly uncertain. Through March 2026, the CME data reveals a fragmented outlook: there’s a 44.7% probability that the Fed holds rates steady through the spring, while a 46.5% probability suggests at least one 25 basis point cut will occur over that period. A more aggressive dual-cut scenario, totaling 50 basis points by March, carries only an 8.8% probability.

The next critical junctures for policy decisions arrive on January 28, 2026, and March 18, 2026, when the FOMC will convene to assess economic conditions and adjust its stance accordingly. Until then, market participants will likely remain vigilant to any economic data that could shift these probability dynamics.