Does not exceed 24%, compared to over 75% for the likelihood of keeping the interest rate unchanged. These figures are not just transient market expectations but reflect an accurate reading of a set of interrelated monetary and economic factors.

First: Inflation has not been defeated yet

Despite the relative decline in inflation rates compared to their peak, core inflation remains above the Fed's target of 2%. This means the central bank does not yet see a strong justification for an early announcement of the start of a monetary easing cycle, especially after the experience of the 1970s when early easing led to a second inflationary wave.

Second: The labor market is still resilient

The latest data on the U.S. labor market shows a gradual slowdown, but without a collapse. Unemployment rates remain relatively low, and wage growth – although it has slowed – is still above the level consistent with price stability. In this environment, a rate cut in January could be interpreted as an unjustified acceleration signal.

Third: The Fed wants 'accumulated evidence' not just one reading

Monetary policy is not built on one month of data. The Fed needs a continuous series of weak inflation readings and slower economic growth before it officially changes its direction. January is considered too early to obtain this 'accumulated evidence.'

Fourth: Managing expectations is more important than the decision itself

An early rate cut could ignite risk appetite in financial markets, leading to indirect monetary easing through rising stocks and falling yields, which may conflict with the goal of curbing inflation. Therefore, the Fed prefers to maintain a cautious tone even if the cut is coming later in 2025.

Summary

The low probability of a cut in January does not mean that the easing cycle has been canceled, but rather that the market and the Fed implicitly agree that the timing is still early. The most likely scenario is to start the cut when policymakers are sure that inflation has indeed returned to a sustainable path, not just a temporary truce.

This reading is important for both investors and decision-makers:

Easing is coming... but not in a hurry

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