On January 14, 2026, policy divisions within the Federal Reserve continued to ferment. Coupled with the impact of the latest economic data, the market’s expected probability of a rate cut in January has dropped below 95%. St. Louis Fed President Musalem clearly stated that the current policy rate is close to the neutral level, and there is no need for further easing in the short term, as it has neither stimulated nor significantly suppressed the economy.

Earlier, data from the U.S. Department of Labor showed that the Consumer Price Index (CPI) rose by 2.7% year-on-year in December 2025, unchanged from the previous value but higher than the market expectation of 2.6%, and the core CPI increased by 2.6%, indicating persistent inflation stickiness. At the same time, U.S. non-farm payrolls increased by only 50,000 in December 2025, the worst annual performance since the 2020 pandemic, but the unemployment rate unexpectedly dropped to 4.4%, forming a special pattern of “weak employment growth but a tight labor market.”

New York Fed President Williams, on the other hand, stated that the current U.S. economic situation is “quite favorable,” the labor market has not shown signs of rapid deterioration, and it is expected to stabilize and gradually strengthen this year, with no strong pressure for interest rate cuts or hikes in the short term. Market analysts believe that the divisions within the Federal Reserve reflect its dilemma between stabilizing growth and controlling inflation. The FOMC meeting at the end of January is likely to keep interest rates unchanged, and the first rate cut may be postponed to the middle of the year.