Forget The January Fed Cut ? Odds Crash To 18%, Rate Freeze Could Stretch Into 2026

Rate-market pricing swung sharply after Wednesday's Federal Reserve meeting. Traders lowered expectations for a January rate cut following Chair Jerome Powell's signal that the Committee will “wait and see” how the economy evolves.

On Thursday, retail prediction market Polymarket showed the probability of no change in January jumping to 82%, leaving just 18% odds of a 25-basis-point cut. That is a decisive shift from the day before, when the cut odds stood at 25%.

Fed funds futures moved in the same direction, though with a slightly softer skew. The CME FedWatch Tool priced a 75.6% chance of a January hold and a 24% chance of a quarter-point cut.

During the press conference, Powell stressed the Fed had already delivered 75 basis points of easing since September and that policy now sits "within a broad range of neutral."

The Fed is now primarily focused on assessing how the labor market evolves after months of cooling and a likely downward revision to payroll growth.

That stance effectively closed the door on a near-term cut.

Analysts Weigh In

Veteran Wall Street analyst Ed Yardeni wrote that the Fed is now "well positioned to do nothing for a while," interpreting Powell's tone as a bid to stabilize the policy path after three consecutive cuts.

Others highlighted deeper implications for 2026.

Bill Adams, chief economist at Comerica Bank, said the new dot plot and Powell's remarks point to a "higher bar" for additional easing next year.

He added that Powell's term ending in May creates uncertainty about how political pressure?namely, President Donald Trump's calls for a new, more dovish Fed Chair?might affect the trajectory of rate cuts in the second half of 2026.

Bank of America's economist Aditya Bhave said Powell "indicated, in our view, that a January pause is his base case," but added that the Fed remains heavily data dependent.

With nearly three months of employment, inflation, and activity data arriving before the next meeting, Bhave said the unemployment rate will likely be the swing variable.

A print of 4.5% or below would validate a hold, 4.6% would leave the decision finely balanced, and 4.7% or higher could compel another cut under Powell.

From Goldman Sachs, David Mericle said the most striking new information was Powell's acknowledgement that payrolls may be overstated by 60,000 jobs per month, well above Goldman's own 30,000?35,000 estimate.

Mericle still expects two normalization cuts in March and June 2026, but noted the dot plot's unusually wide dispersion with terminal-rate estimates ranging from 2.5?2.75% to 3.75?4%.

Stocks Retreat After Oracle Earnings

Uncertainty over the Fed's policy path and a 15% plunge in Oracle Inc. dragged Wall Street lower on Thursday, erasing Wednesday's gains as major tech-heavy indices slipped in early New York trading.

The Nasdaq 100, tracked by the Invesco QQQ Trust , fell 1.5%, while the Roundhill Magnificent Seven ETF declined by the same amount.

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