Federal Reserve has a 95% probability of holding steady in January, rate decision amid political turmoil

According to the latest data from CME’s “Federal Reserve Watch,” the probability of the Federal Reserve maintaining interest rates in January is as high as 95%, with only a 5% chance of rate cuts. Behind this expectation, it reflects the Fed’s cautious assessment of the economic situation and also mirrors the complex influence of the current US political environment on central bank decisions. Meanwhile, the cryptocurrency market has already been digesting this expectation in advance, with risk aversion sentiment significantly rising.

The True Reflection of Interest Rate Expectations

January decision almost settled

Based on market pricing, the probability of the Federal Reserve keeping interest rates unchanged in January is 95%, meaning the likelihood of a 25 basis point rate cut is only 5%. Longer-term expectations remain conservative—by March, the probability of a total 25 basis point cut is only 26%, with a 72.8% chance of holding rates steady, and the probability of a 50 basis point cut is extremely low at just 1.2%.

This data clearly indicates that the market’s expectation for the Fed to continue cutting rates in the short term has been significantly reduced. Compared to the “rate cut cycle” widely bet on at the beginning of the year, current expectations have shifted to “wait and see.”

Political pressure becomes a new variable

But behind all this, it’s not just economic data supporting the outlook. According to the latest news, Fed Chair Powell recently received a subpoena from the Department of Justice regarding his Congressional testimony in June 2025 about the Washington headquarters renovation project of the Federal Reserve. More notably, the Trump administration has exerted pressure on Powell, threatening to file criminal charges if rates are not cut. Powell subsequently issued a statement explicitly stating that “monetary policy does not succumb to intimidation.”

This series of events has directly impacted market confidence in the Fed’s independence. The US stock, bond, and currency markets have experienced a rare “triple kill,” reflecting investors’ concerns about the stability of central bank policies.

Market Reactions Are Already Evident

Crypto as a Safe-Haven Signal

Despite political turmoil triggering sell-offs in traditional markets, the cryptocurrency market has shown a different response. Bitcoin broke through the $91,500 level, and Ethereum approached $3,150 amid the Fed policy expectations adjustment. This trend reflects market pricing of the following factors:

• Maintaining interest rates implies short-term relief from dollar depreciation pressure, but long-term inflation risks remain
• Political pressure on the central bank may increase policy uncertainty, boosting demand for safe-haven assets
• Gold prices continue to rise, with de-dollarization trends strengthening, benefiting assets like Bitcoin and other non-sovereign currencies

Subtle shifts in capital flows

According to CoinShares reports, digital asset investment products saw a net outflow of $454 million last week, with a total outflow of $1.3 billion over the past four days, nearly offsetting the net inflow since the beginning of the year. This reflects investors’ rapid response to changing policy expectations—the diminished expectation of Fed rate cuts directly dampened risk asset enthusiasm.

Key Focus for the Future

March as a policy turning point

Although the January rate hold is almost certain, the situation in March remains uncertain. Goldman Sachs expects the Fed to cut rates twice more in 2026, with 25 basis point cuts in June and September respectively. This indicates that the overall market expectation for rate cuts within the year still exists, but the timeline has been significantly pushed back.

Political and policy game

Powell’s firm response to Trump’s pressure demonstrates the Fed’s determination to maintain independence, but this confrontation could also become a new variable in subsequent policy-making. Although White House National Economic Council Chair Harret has expressed respect for the Fed’s independence, whether this statement can truly restrain the actions of the Trump administration remains to be seen.

The market generally expects about a 20% chance of leadership changes at the Fed in March, further increasing policy uncertainty.

Summary

The 95% probability of the Fed maintaining interest rates in January reflects two implications: first, economic fundamentals support the central bank’s cautious stance; second, political pressure is becoming a new factor influencing policy. For the cryptocurrency market, this means that short-term risk aversion sentiment will continue, but the long-term policy direction still requires close attention. The March decision will be a key turning point, as developments in political circumstances and economic data could rewrite market expectations. Investors should prepare for increased policy uncertainty.