As Yahoo Finance’s Jennifer Schonberger details, consensus around the Fed’s policy move on Wednesday has centered around a quarter-point rate cut — even if the decision will be a close one.
According to CMEGroup’s FedWatch, traders see an 89% chance of the Fed cutting interest rates by 25 basis points at the end of Wednesday’s FOMC meeting.
But looking ahead to the January meeting and into 2026, the outlook is more uncertain.
JPMorgan’s Michael Feroli wrote in a Dec. 5 note that a widely held view is that the Fed will make a “hawkish rate cut” on Wednesday, in which the central bank lowers interest rates but signals a pause in January. Traders put a 23% chance that the Fed will continue to cut interest rates at its meeting on January 27-28.
“At the press conference, we expect Powell to emphasize that with policy rates approaching neutral, the time for risk management cuts has passed and that further cuts would only be accompanied by a material deterioration in the labor market,” Feroli wrote.
Feroli added: “We don’t expect him to comment directly in January, but rather to emphasize that there is a lot of data to be released between now and the January meeting, which will guide their decision.”
Views for the rest of the year range from the Fed cutting rates at the next few policy meetings due to a deteriorating labor market to further cuts over the summer amid a change in Fed leadership.
Read more about the 2026 Fed policy forecast here.
