The odds of a 25-bps interest-rate cut at the January 2026 Federal Open Market Committee (FOMC) slightly dropped after the Fed published the minutes from its December meeting. The odds sit at 15.5% on CME’s FedWatch tool, down from 16.6% yesterday.
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The Fed remains cautious about the rate cut outlook given sticky inflation that has remained above its target of 2%. Most officials said they would support lower rates if inflation eases, although some worry that the path to 2% has stalled this year.
Fed Signals Patience after December Rate Cut
The minutes also showed that some participants believe it is “appropriate to keep the target range unchanged for some time” in order to properly analyze the effects of lower rates on inflation and the labor market.
The Fed’s last meeting resulted in a 9-3 vote to cut rates, highlighting a division among policymakers. Lower rates can stimulate the labor market, which has shown signs of weakening in recent months. At the same time, it can also lead to higher inflation due to cheaper borrowing costs.
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