Fed rate cut odds shift as FOMC blackout begins
Economy
Fed rate cut odds shift as FOMC blackout begins.The Federal Reserve will decide what happens to interest rates on January 28.
Key Points
Fed enters quiet period before January 28 FOMC, stalling interest rate cut speculation.
Strong labor data and persistent inflation lower odds of imminent rate cuts.
Powell’s term ends May 2026; Trump favors a dovish replacement to lower rates.
Fed interest rate expectations are hitting a wall of silence as the central bank’s official blackout period begins Saturday, January 17. Ahead of the crucial January 28 FOMC meeting, a series of hot labor reports and sticky inflation data have already forced a massive market recalibration, crushing hopes for immediate rate relief.
Fed officials who spoke on January 16:
Boston Fed President Susan Collins introduced Bowman at “Outlook 26: The New England Economic Forum.”
Fed Vice Chair for Bank Supervision Michelle Bowman said: “With inflation pressures easing—after excluding one-off tariff effects—and with the risk that labor market conditions could weaken further, I see policy as moderately restrictive.”
Federal Reserve Vice Chair Philip Jefferson said: “I supported the FOMC’s decisions to reduce the policy interest rate last year… This policy stance puts the economy in a good position moving forward.
Bowman’s comments are dovish but unlikely to move the needle in January. Despite layoffs surging to 1.2 million in 2025, according to Challenger, Gray & Christmas, the unemployment rate retreated last month, and this week’s unemployment claims numbers were surprisingly low.
A combination of fresh data showing the labor market may be finding its footing and inflation that’s still above the Fed’s 2% target suggests Fed Chairman Powell is unlikely to cut rates further this month, leaving would-be borrowers in the lurch.
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