That December 2025 decision marked the third 25-basis-point reduction of the year and pushed the federal funds rate to its lowest level since 2022. It followed a late-October cut to a 3.75% to 4.00% range and an earlier September move that formally launched the latest easing cycle.
Markets, however, appear unconvinced that the momentum carries into January. CME futures pricing suggests traders see the Fed pausing to assess the cumulative effects of last year’s reductions rather than extending the cycle immediately.
All in all, the message is clear. While the Fed spent some of 2025 dialing rates lower, markets now appear content to wait. January may be less about action and more about confirmation—confirmation that last year’s easing did its job, or at least bought policymakers time.
For now, the intrigue lies not in what the Fed will do in January, but in how long this pause might last. Of course many suspect that a whole lot more Fed easing is coming to a theater near you.
FAQ What does CME FedWatch show for January 2026? CME futures imply an 83.9% chance the Fed holds rates at 3.50% to 3.75%. How do prediction markets view the January meeting? Polymarket and Kalshi both price roughly a 90% probability of no rate change. When did the Fed last cut rates? The Fed last reduced rates in December 2025, following earlier cuts in October and September. Is political pressure affecting market expectations? Despite President Trump’s calls for cuts, markets expect Fed leadership to stay cautious in January.
