Bets on a Fed rate hold in January climb to likely, with the reason unclear

Traders now see the Federal Reserve leaving interest rates unchanged at its January meeting as likely, after bets on a hold climbed on Thursday from roughly a toss-up. The reason for the move is not clear, and this story will be updated if a cause emerges.

Across the range of January outcomes, traders expect no change. Their central expectation is 0 bps, within a range from 0 bps to 25 bps. A quarter-point increase is still possible but looks unlikely, and bets on it fell sharply over the same stretch in which bets on a hold rose.

The shift came late in the day. Bets on a January hold hovered near a toss-up through Wednesday and the early hours of Thursday, then picked up through the afternoon and evening. Over the past 10 days they have swung repeatedly. They rose early last week, dropped sharply last Wednesday after the Bureau of Labor Statistics reported September inflation above forecasts, then recovered by Friday and slipped again on Tuesday and Wednesday. That earlier inflation report is background, not an explanation for Thursday's rise.

The January outlook sits within a broader picture. Traders see the Fed's October meeting ending with no change as all but certain, and their central expectation for that meeting is 0 bps. A hold in December looks unlikely, and the most likely December result is a 25 bps increase. For the end of 2026, traders' central expectation for the Fed's rate is 4.25%, within a range from 4% to over 4.5%.

Taken together, those expectations point to a possible increase in December followed by a pause in January. Traders have not settled on that path, though, and a January hold remains short of certain.

What happens next depends largely on economic data and Fed commentary before the meetings. No specific event has been tied to Thursday's shift, and traders' views on January have moved back and forth in recent days, so they could change again.