CPI cools down but the labor market stabilizes. Why has the Federal Reserve maintaining interest rates in March become the market consensus?

Since February 2026, global financial markets have continued to focus on two key data points across the ocean: first, the U.S. January non-farm payroll report released on February 10, and second, the U.S. January Consumer Price Index (CPI) published on February 13. The release of these reports has almost set the tone for the Federal Reserve’s monetary policy direction in the first half of this year. Despite the data showing one hot and one cold, the market has unusually reached a consensus: a near certainty that the Fed will keep interest rates unchanged at the March policy meeting.

According to the latest data from the CME FedWatch Tool, traders now estimate a 94% probability that the Federal Reserve will maintain the federal funds rate target range at 3.50%–3.75% in March.

Non-Farm Payrolls Surpass Expectations: The “Anchor of Stability” in the Labor Market

The primary pillar behind this consensus is the unexpectedly strong labor market. The U.S. Department of Labor reported on February 10 that in January, seasonally adjusted non-farm employment increased by 130,000 jobs, far exceeding market expectations of 55,000 to 70,000. Meanwhile, the unemployment rate also fell back to 4.3%, hitting a new low since August 2025.

This non-farm payroll report is significant because it dispels fears of a rapid cooling of the U.S. economy. Although the employment data for all of 2025 was sharply revised downward, indicating genuine weakness in the labor market over the past year, the unexpected rebound in January at least proves that, at current interest rate levels, employer demand remains resilient.

Recent statements from Federal Reserve officials also support this view. Dallas Fed President Lorie Logan said that although the labor market had softened earlier, employment prospects are gradually stabilizing. Cleveland Fed President Loretta Mester directly stated that the current monetary policy is at an appropriate level and can maintain rates without change. Strong employment data provides the Fed with ample “wait-and-see” capital; even if inflation eases, as long as the labor market does not collapse, there is no need for the Fed to rush into rate cuts.

CPI Slowdown Confirms Trend: Inflation Returns but Hidden Concerns Remain

If the non-farm payrolls data provided a reason to “maintain the status quo,” then the CPI data released on February 13 for January paved the way for this decision, even strengthening the Fed’s confidence in “patience.”

Data shows that the unadjusted U.S. January CPI rose by 2.4% year-over-year, below the market expectation of 2.5%, and hitting a new low since May 2025. The core CPI also cooled to 2.5% annually, the lowest since March 2021. On the surface, the trend of inflation easing is undeniable. Lawrence Werther, Chief Economist at Daiwa Capital Markets America, commented that both overall and core inflation growth rates just meet the minimum threshold for maintaining a patient policy.

However, beneath the surface, not all is smooth. Data shows that core services inflation (excluding housing), which has been a focus for policymakers, jumped 0.6% month-over-month in January. This change could attract the attention of regional Fed presidents cautious about rising prices. Additionally, due to tariffs implemented after the Trump administration and the lagged effects of a weaker dollar over the past year, imported inflation remains a pressure point.

Therefore, for the Fed, the January CPI report is a “reassuring but not victory-laden” scorecard. It confirms the overall downward trend in inflation but also hints at the risk of price pressures resurging due to subtle internal structural factors. In this “good but not good enough” scenario, maintaining current policy and continuing to observe remains the most prudent choice.

Why Is Market Consensus So Firm?

Overall, the reason why maintaining rates in March has become market consensus is that the current data combination provides the Fed with ample justification to extend its “observation period.”

On one hand, inflation has cooled but remains above the 2% target, with core services inflation still stubborn. On the other hand, the stabilization of the labor market removes the urgency of a hard landing, meaning the Fed does not need to cut rates to save jobs. As Fed Governor Christopher Waller said, recent data shows that the slowdown has “stalled,” and before having more confidence in inflation returning to 2%, patience should be maintained.

In this macro context, the crypto markets have also found their rhythm. As of February 14, data from the Gate exchange platform shows that Bitcoin (BTC) has demonstrated resilience after macro news, trading at $68,876.80, within a narrow range of $68,500 to $69,200. This price action indicates that the market is digesting the expectation of delayed rate cuts but not their disappearance. As long as the Fed does not pivot back to hawkish rate hikes, maintaining the current rate environment remains a relatively stable external condition for risk assets.

Ethereum (ETH) shows more correlation with Bitcoin, currently hovering around $2,048.94, also waiting for further macro signals.

Conclusion

In spring 2026, the Federal Reserve appears particularly confident in its interest rate decisions. The strong January non-farm payrolls and the cooling CPI together form a safety net, allowing the Fed to hold steady in March and continue observing the effects of fiscal policy and global economic developments. For traders, whether in traditional markets or crypto, this window before the March meeting may be the key moment to reassess asset allocations and patiently wait for clearer trends.