The Federal Reserve held interest rates steady on Wednesday, a move that ended a sharp reversal of market expectations that once favored a rate cut in early 2026.
“Job creation remained weak and the unemployment rate showed some signs of stabilization,” the central bank said in its policy statement. “Inflation remains somewhat elevated.”
There were two dissents on the decision to keep policy unchanged, with recent Trump appointees Stephen Miran and Chris Waller – apparently in the running to replace Jerome Powell as Fed chair – each favoring cutting the federal funds rate by 25 basis points.
Bitcoin remained just below $89,500 following the expected Fed action, and U.S. stocks were little changed. The US dollar remained sharply higher during the day following yesterday’s sharp decline, and gold continued to advance 3.7%, near record levels of $5,300 an ounce.
Just two months ago, traders were divided on the outlook, with markets forecasting a drop of more than 40% in January.
By the end of November, those odds had already begun to fade. As the meeting approached, the change was complete. Markets have forecast no change at almost 99%, effectively erasing expectations for near-term easing and reinforcing expectations that the Fed will maintain its restrictive policy through the first quarter.
Although the January decision closes the door to 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 putting the probability at just 16%. The odds are a bit higher in April, standing at around 30%.
“The U.S. Federal Reserve’s decision to hold interest rates on hold reflects continued inflation concerns and a stable economic backdrop, which will likely lead to near-term volatility in cryptocurrency markets as liquidity remains supportive,” Nick Ruck, director of LVRG Research, said in a Telegram message. “If Chairman Powell’s press conference expresses a cautious ‘higher for longer’ stance or hints at fewer cuts coming 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 p.m. ET for clues about the central bank’s thinking.
