The Federal Reserve’s January policy decision marked a clear shift in interest-rate expectations, reinforcing a backdrop that has weighed on crypto markets.
The central bank held its benchmark rate steady on Wednesday, capping a reversal from earlier market pricing that had pointed to an early 2026 rate cut.
“Job gains have remained low, and the unemployment rate has shown signs of stabilizing,” the Fed said in its statement, while noting that inflation “remains somewhat elevated.”
The decision was not unanimous. Stephen Miran, a recent Trump appointee, and Chris Waller—both mentioned as potential successors to Chair Jerome Powell—dissented, calling for a 25-basis-point cut.
Market reaction was muted. Bitcoin traded just under $89,500, U.S. equities were little changed, and the dollar strengthened sharply following a steep decline the previous day. Gold extended its rally, climbing 3.7% to near record levels around $5,300 per ounce.
The contrast with expectations earlier in the quarter was stark. As recently as two months ago, prediction markets placed the odds of a January rate cut above 40%. Those bets faded through late November, and by the time of the meeting, markets were pricing a hold with near certainty, reinforcing expectations that policy will remain restrictive through the first quarter.
While the January decision effectively rules out near-term easing, expectations for rate cuts later in the year persist. CME FedWatch data show only a 16% chance of a cut in March, with odds rising to around 30% by April.
“The Fed’s decision reflects ongoing inflation pressures alongside a stabilizing economic environment,” said Nick Ruck, director of LVRG Research, in a Telegram message. “That mix is likely to drive continued near-term volatility in crypto markets.”
