Fed Maintains Rates at 95% Probability in January

Summary

According to CME’s “FedWatch” tool, the probability of the Federal Reserve maintaining its current interest rate in the January meeting is 95%, with only a 5% chance of a 25 basis point cut.Golden Finance This consensus has strengthened from around 83% in early January.AnueSec The shift is largely due to robust economic data, particularly a surprise drop in initial jobless claims, which reinforces a high-rate environment and has pushed market expectations for the first rate cut to June.FX678 Consequently, the probability of a rate cut by March has fallen to 26%.Golden Finance

Impact Analysis

So the January meeting is a foregone conclusion—a hold is priced at 95%.Golden Finance+ 2 The real story is how quickly the market has abandoned hopes for a March cut. We’ve gone from a ~44% probability in early January to just 26% now.Golden Finance This isn’t a minor adjustment; it’s a major repricing driven by strong labor data that gives the Fed zero reason to rush.FX678 They’ve successfully pushed the narrative out to a June cut, but I’m not convinced that’s the end of it.FX678

The bottom line is the path of least resistance is for cut expectations to be delayed even further. This reinforces the strong dollar trade and continues to be a headwind for rate-sensitive growth assets. The market is finally capitulating to the Fed’s ‘higher for longer’ stance, and I’d stay positioned for that until we see definitive cracks in the employment data.