The probability of the Fed keeping interest rates unchanged in January, tracked in basis points, increases to 84.5%.

Based on the data from CME’s “FedWatch” tool as of the end of December 2024, it has been revealed that the probability of the Federal Reserve (FRB) holding interest rates steady in the January monetary policy decision has reached a high level of 84.5%. While market participants are closely watching the movement in basis points, they are also factoring in the central bank’s cautious stance.

January Rate Decision: Limited Possibility of a 25 Basis Point Cut

The probability of a 25 basis point (0.25%) rate cut in January remains at 15.5%, indicating that the likelihood of the FRB keeping rates unchanged is significantly higher. This outlook reflects recent inflation trends and the Fed’s cautious monetary policy stance. Most market participants expect that the decision to cut rates in January will likely be postponed.

2026 First Half Interest Rate Scenario: Multiple Outlooks in Basis Points

From a longer-term perspective, several scenarios involving cumulative rate cuts by the end of March have emerged, with market participants differentiating in basis point increments. The most probable scenario is holding rates steady at 51.8%, while the probability of implementing a cumulative 25 basis point rate cut is 42.2%. The chance of a larger 50 basis point cut is only 6.0%, indicating that the market is leaning towards a gradual easing environment.

Why the FRB Prefers to Keep Rates Steady: Basis Point Policy Adjustment Phase

The main reason the FRB favors maintaining steady interest rates is that the current inflation environment remains elevated. Even with micro-adjustments in basis points, it appears that the authorities are trying to curb excessive market expectations while exploring a phased policy approach. This cautious strategy is positioned as a means to maintain financial system stability amid global economic uncertainties.