Fed Set to Pause Rate Cuts; Bitcoin Traders Eye Powell’s Tone Over Decision
With a rate pause priced in, crypto markets focus on whether Chairman Powell signals a temporary skip or a hawkish pivot for 2026.
The Federal Reserve is widely expected to hold interest rates steady this Wednesday, ending a streak of cuts and shifting the market’s focus entirely to Chairman Jerome Powell’s post-meeting commentary. Bitcoin (BTC) hovered around $87,900 on Sunday, reflecting caution as traders assessed whether a pause signals a temporary policy check or a hawkish pivot for 2026.
The Signal: Hawkish or Dovish Pause?
With the Federal Open Market Committee (FOMC) meeting scheduled for January 27-28, the decision itself is priced in as a non-event. CME Group data currently assigns just a 20% probability to a 25 basis point cut this month. The liquidity narrative now hinges on Powell’s justification for the pause.
A hawkish pause scenario involves Powell flagging lingering inflation risks, denting rate-cut bets and pressuring risk assets lower. A dovish scenario would mean Wednesday’s pause is temporary and rate cuts would resume in the coming months.
Institutional Context
The stakes for crypto markets are specific to the 2026 liquidity outlook. A “dovish pause,” where the Fed signals this is merely a skip before resuming cuts in March, could reignite the bid for risk assets. Conversely, if policymakers emphasize sticky inflation metrics, the dollar could strengthen, creating immediate headwinds for BTC.
Markets are already looking past January. While odds for a cut this week remain low, investors see a 45% chance of easing at the mid-March meeting. Powell’s press conference will be the first opportunity for the Fed’s governors to update guidance this year, setting the baseline for Q1 volatility.
