The Federal Reserve kept interest rates steady on Wednesday, a decision that capped a sharp reversal in market expectations that had once favored an early rate cut in 2026.
“Job growth has remained low and unemployment has shown some signs of stabilization,” the central bank said in its policy statement. “Inflation is still somewhat elevated.”
There were two dissents to the decision to keep policy steady, with recent Trump appointee Stephen Miran and Chris Waller — reportedly in the running to replace Jerome Powell as Fed chairman — each favoring trimming the Fed Funds rate by 25 basis points.
Bitcoin remained just below $89,500 after the expected Fed action and US stocks were little changed. The US dollar remained significantly higher on the day after yesterday’s big drop, and gold continued to gain 3.7%, near record levels of $5,300 per ounce. ounces.
Just two months ago, traders were divided on the outlook, with prediction markets pricing a January cut at more than 40%.
By late November, those odds had already begun to fade. On the way into the meeting, the shift was complete. Markets priced in no change at nearly 99%, effectively erasing expectations of near-term easing and cementing the view that the Fed would keep policy restrictive through the first quarter.
While the January decision closes the door on early cuts, it has not completely eliminated expectations of easing.
Market participants do not expect the Fed to resume rate cuts at its next meeting in March, with CME FedWatch placing the odds at just 16%. The chances are slightly higher in April, increasing to around 30%.
“The US Federal Reserve’s decision to hold interest rates reflects persistent inflation concerns and a stabilizing economic backdrop, which is likely to result in near-term volatility for crypto markets as liquidity remains supportive,” Nick Ruck, director of LVRG Research, said in a Telegram announcement. “If Chairman Powell’s press conference conveys a cautious ‘higher-for-longer’ stance or hints at fewer cuts ahead in 2026, we could see near-term pressure on risk assets, including bitcoin.”
Investors will now look to Jerome Powell’s post-meeting press conference at 2:30 PM ET to get clues about the central bank’s thinking.
