The Expectations for the Fed's Interest Rate Decision This Month Are Almost Settled

The market is increasingly consolidating the belief that the U.S. Federal Reserve (Fed) will not change interest rates at the policy meeting scheduled for the end of January. According to data from Polymarket – a blockchain-based prediction platform – the probability of the Fed holding interest rates steady at the January 29th meeting has surpassed 96%.

Trading contracts on Polymarket show that most investors are betting on the “interest rate hold” scenario. The total trading volume for this option has reached approximately $19.5 million, with the probability valued at up to 97%.

Meanwhile, the market only prices in a 2% chance of the Fed cutting interest rates by 0.25%, even though trading volume for this scenario still amounts to about $17.2 million. More aggressive cuts, from 0.5% or higher, or even rate hikes, are each priced at less than 1%, indicating the market’s near-absolute confidence that the Fed will continue to maintain its current monetary policy.

Notably, although former President Donald Trump has repeatedly pressured the Fed to lower interest rates early to stimulate the economy, investors still believe that the Fed will not take any easing measures this month. The current Fed Chair Jerome Powell will end his term in May, and many sources suggest that if Trump returns to the White House, he might appoint a new official with a more hawkish stance on rate cuts.

However, at present, all signs point to the Fed continuing to adopt a cautious stance, prioritizing inflation control and macroeconomic stability. The official interest rate decision will be announced on January 29th, and global markets are awaiting this statement to confirm what most investors already believe: interest rates will remain unchanged.