Fed Chair Jerome Powell’s speech suggested that the FOMC may hold off on lowering interest rates for a while. Amid his speech, the odds of interest rates remaining unchanged at the January FOMC meeting have surged while Bitcoin has fallen, after climbing to as high as $94,000 on the day.
Jerome Powell Signals Pause In Rate Cut Easing Cycle
In his FOMC press conference opening remarks, the Fed chair stated that the adjustments to their policy stance since September have brought them within a “range of plausible estimates of neutral.” He further remarked that this leaves them well positioned to determine the extent and timing of additional adjustments to their policy rate based on the incoming data, the evolving outlook, and the balance of risks.
This signaled that Jerome Powell and the Fed may pause further rate cuts heading into the January 2026 FOMC meeting. As CoinGape reported, the median projection among Fed officials is just one 25 bps cut in 2026, after three cuts this year.
Meanwhile, the Fed chair again noted that the downside risks to employment have risen while inflation “remains somewhat elevated.” He also mentioned that interest rates are likely to stay the same or they will cut a little next year, but that he doesn’t think a hike is anyone’s base case.
Furthermore, Jerome Powell stated that the inflation risk is mostly due to the Trump tariffs and that the tariffs are likely to lead to only one-time price increases. He added that inflation could peak in the first quarter of next year if there are no new tariff announcements.
Odds Of A January Rate Cut Fall
CME FedWatch data shows that the odds of a January rate cut have fallen amid Jerome Powell’s speech. There is only a 24% chance that the Fed will again lower rates by 25 basis points, while there is a 76% chance they will keep interest rates unchanged.
The Fed chair had noted that they will have more data to work with ahead of the January FOMC meeting. As CoinGape reported, the Department of Labor will release the PPI inflation report on January 14, two weeks ahead of the FOMC meeting. Meanwhile, the CPI inflation report will drop on January 13.
Despite Jerome Powell and the Fed projecting only one rate cut in 2026, Bloomberg’s chief economist, Anna Wong, predicts the Fed could end up cutting by 100 bps next year. She noted that they anticipate a weak payroll growth and “scant signs of an inflation resurgence.”
It is worth noting that Powell’s term as Fed chair ends in May, with Trump set to appoint someone willing to cut rates immediately. Kevin Hassett, the current favorite to land the role, has said there is plenty of room to cut rates.
TradingView data shows that the Bitcoin price is trading at around $92,000 following Jerome Powell’s speech. The flagship crypto had rallied to as high as $94,000 but is now correcting, a move that has become a historical trend following most FOMC meetings this year.
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