January Fed Rate Cut Odds Are Shifting Fast

Traders are shifting expectations for the Federal Reserve’s January meeting after labor data showed the unemployment rate rising in November, nudging investors to consider whether policymakers could deliver a fourth straight rate cut. The Fed cut rates in September, October, and December, leaving the federal funds target range at 3.5% to 3.75%.

Reuters’ reporting on fed funds futures shows the implied probability of a January cut jumped right after the jobs report—briefly reaching 31% from 22%—before settling around 27%, meaning markets still see a majority chance of a pause. The same futures curve continues to price in roughly two quarter-point cuts over 2026, with the first move most likely around mid-year.

The job numbers explain why odds moved. Payrolls increased by 64,000 in November after a shutdown-distorted October decline, but the unemployment rate ticked up to 4.6%. With hiring slowing and participation rising, investors are debating whether the economy is cooling enough to force the Fed’s hand, or staying stable enough for officials to wait.

That tension is front and center heading into the Jan. 27–28 policy meeting. Investopedia notes that traders expect rates to hold steady, but the decision could swing with incoming inflation and employment reports that were delayed by the government shutdown. Fed Chair Jerome Powell has said the committee is “well-positioned” to adjust policy based on the data, while officials remain split between protecting the job market and keeping inflation on a firm path back to 2%.

For consumers, any shift matters because the fed funds rate influences borrowing costs for credit cards and auto loans, and it can ripple into longer-term rates as markets reprice the outlook over coming weeks.