Deciphering the Fed's January interest rate decision in basis points—84.5% chance of holding steady

The term “basis points” frequently appears in financial markets. It is the smallest unit used to measure interest rate fluctuations, with 1 basis point = 0.01%. In other words, a 25 basis point rate cut means lowering interest rates by 0.25%, an essential concept for market participants to accurately recognize policy changes.

What are basis points—A common language in financial markets

Basis points are units divided by 100 of percentage points, used to express subtle changes in interest rates and bond yields. For example, “50 basis points decrease” means a 0.5% rate cut, allowing precise verification of discrepancies between market expectations and actual results.

According to the year-end CME “FedWatch” tool analysis, several scenarios are emerging regarding how the Federal Reserve (Fed) will move interest rates over the coming months. This predictive tool, based on futures market data, is an industry standard that reflects the collective expectations of market participants.

Fed’s January outlook—84.5% probability of holding steady

Regarding the interest rate policy in January, the probability of maintaining the current stance (holding steady) has reached 84.5%, with only a 15.5% chance of a 25 basis point rate cut. This overwhelmingly high probability of holding steady reflects recent inflation trends and the Fed’s cautious stance.

The market has already digested this outlook, with many financial institutions and investors beginning to build investment strategies assuming no change in interest rates at the start of the year.

2026 interest rate outlook—Multiple scenarios intersect

Looking further ahead, the cumulative scenarios until March 2026 are more complex. While the probability of holding steady is the highest at 51.8%, there is also a 42.2% chance that a cumulative 25 basis point rate cut will be implemented. Meanwhile, a more substantial 50 basis point cut has a limited probability of 6.0%.

From these figures, it can be inferred that the Fed is likely to maintain a cautious stance for the time being but will respond flexibly to changes in economic conditions. The market will continue to monitor closely, in basis point units, where the turning points in interest rate decisions might occur.