Fed now expected to raise rates in January as bets on a hold fade

Traders now expect the Federal Reserve to raise interest rates in January, with a quarter-point increase seen as the likely result of the Jan. 26-27 meeting and a decision to leave rates alone now viewed as unlikely.

Bets on a January hold fell again on Thursday, sliding from a toss-up to the weaker side of the ledger over the course of the day. The reason for this latest drop is not yet clear. No new report or statement from the Fed has been identified as the trigger.

The slide extends a retreat that began on Tuesday. Until then, a hold had looked likely, with expectations firming through early November and standing at their strongest on Monday. They dropped sharply on Tuesday, eased a little further on Wednesday and fell again on Thursday. Over the same stretch, a quarter-point increase has gone from a toss-up to the likely outcome.

Tuesday was the day the government reported that consumer prices rose 0.4% in October from September, above the 0.3% economists expected. The report did not provide an official 12-month rate because October 2025 data were unavailable. The Associated Press reported that expectations for another hike in January rose sharply after the release.

The Fed raised its target range to 3.75%-4.00% in September and held it there at its Oct. 27-28 meeting, when two officials preferred a quarter-point increase. Earlier hot inflation readings had already left traders divided on January, though a hold remained the favorite through October.

The Fed meets next on Dec. 8-9, and traders treat a hold at that meeting as a long shot. The January question is separate: it turns on whether the Fed changes rates from wherever they stand going into that meeting, regardless of what it does in December.

The next inflation report, covering November, is scheduled for Dec. 10, a day after the December decision, so officials will set rates that month without it. It will be among the last major price readings before the January meeting.