The probability of the Federal Reserve maintaining interest rates in January reaches 86%, with strong employment dampening expectations of rate cuts.

According to the latest news, the probability of the Federal Reserve maintaining interest rates in January has risen to 86.2%, with the chance of a rate cut only at 13.8%. This data reflects a significant shift in market expectations for the Fed’s short-term policy, driven by recently released strong employment data.

Reasons for the Sudden Drop in Rate Cut Expectations

Employment data becomes the key factor

The release of the US December private sector employment data (ADP data) changed market expectations. According to the latest news, December ADP employment figures show a moderate recovery in US employment, which directly lowered market expectations for a rate cut in January.

Related data comparison:

Initial jobless claims also performed strongly, reaching 208,000, below the expected 210,000, further reinforcing the resilience of the labor market.

The Fed’s Dilemma

Treasury Secretary Scott Bessent recently urged the Fed to accelerate rate cuts, but the strong employment data makes this call seem somewhat powerless. The benchmark interest rate is currently in the 3.5-3.75% range, with a cumulative 75 basis points cut in 2025. However, strong employment data means the Fed has no urgent reason to start a new round of rate cuts in January.

Medium-term Rate Cut Expectations Still Exist

Although the probability of a rate cut in January is low, market expectations for rate cuts in the medium term still persist. According to quick news data:

• The probability of a cumulative 25 basis points cut by March is 38%
• The probability of holding rates steady is 57.4%
• The probability of a cumulative 50 basis points cut is only 4.6%

This indicates that the market expects the Fed to possibly start rate cuts in February or March, but with limited magnitude. The projected total rate cut for 2026 is about 150 basis points, which is more moderate compared to previous more aggressive expectations.

Market Focus Has Shifted to Non-Farm Payroll Data

Currently, market attention has shifted from the January rate cut expectations to the upcoming US non-farm employment report. This report will be a key data point in setting the tone for the Fed’s subsequent policy, expected to be released soon. Analysts believe that the performance of the non-farm data will directly influence market judgments on the pace of rate cuts in 2026.

Impact on the Cryptocurrency Market

The decline in rate cut expectations poses short-term pressure on risk assets. Bitcoin retreated to about $90,000 after the related data was released, with the overall crypto market falling approximately 2%. However, from a longer-term perspective, the market still anticipates the Fed to cut rates in 2026, providing medium-term support for risk assets including cryptocurrencies.

Summary

The market’s mainstream expectation is now that the Fed will keep interest rates unchanged in January, with strong employment data being the main driver. In the short term, rate cut expectations are suppressed, but this does not mean there will be no rate cuts in 2026. The market needs to closely monitor subsequent economic data such as the non-farm employment report, as well as potential policy changes from the newly appointed Fed Chair, who has been selected by Trump. For crypto investors, the key is to understand the changing pace of the rate cut cycle, rather than simply reacting to short-term fluctuations.