Fed decision preview: Markets see January hold as near-certainty despite cooling inflation

The Federal Reserve's first policy meeting of 2026 is widely expected to result in unchanged interest rates, with prediction markets pricing only a 32% chance of a rate cut at the January 29 decision.

The calculus is straightforward: despite encouraging inflation data—December CPI came in at 2.7% year-over-year, the lowest reading in three years—Fed officials have consistently messaged patience in their approach to further easing.

Chair Powell's recent comments emphasized the need to see "sustained progress" rather than react to individual data points. Translation for traders: the bar for a January cut is high.

More interesting is the divergence between Kalshi and Polymarket on this question. Kalshi shows 32% odds of a January cut, while Polymarket trades at 35%—a 3-point spread that sophisticated traders are watching closely.