CB Views: January 2026 FOMC Preview

Scenario 

Probability 

Assessment

Dovish Pause
Base-Case

50%

• Given market pricing and expectations, the January FOMC will be the first pause of the cycle (post the three cuts in a row in 2025).
• However, given that the median dots for 2026 hint at one cut, we
  expect chair Powell to suggest that the Fed is still in easing mode
  and that the Fed has a bit more to go before hitting a neutral rate.
• We also expect Powell to stay focused on the weak labor market
  and that it is still too soon to suggest the trend has changed. The key will be if Powell references the upcoming benchmark revisions.
• Market Implication: We continue to believe external factors will
  matter more than the Fed and US data, for now. However, if chair
  Powell sounds more dovish during the presser, and doesn’t take
  cuts off the table, the market can see a minor grind lower in rates.

Neutral Pause

30%

• In our view, the difference between a dovish and neutral pause will come down to if the FOMC statement mentions (and Powell then reiterates in the presser) “balance of risks” has come into balance.

Hawkish Pause

20%

• The Fed speakers have been sounding more hawkish lately and the risks is that chair Powell channels that. If we hear that the Fed is done for now with the normalization and is in a “wait and see” mode this would trigger a hawkish reaction by all asset classes.