Strong U.S. Jobs Report Dims Fed Rate Cut Hopes, Impacts Crypto Markets

A stronger-than-expected U.S. jobs report has significantly reduced expectations for an imminent Federal Reserve rate cut, reshaping market sentiment across traditional finance and the cryptocurrency sector. Fresh labor market data points to continued resilience in the U.S. economy, prompting investors to reassess the timing of monetary easing in 2026.

According to the latest figures, January Nonfarm Payrolls increased by 130,000, far exceeding expectations of 65,000. Meanwhile, the unemployment rate declined to 4.3% from 4.4%, even as labor force participation improved. These numbers suggest hiring conditions are stabilizing after a slowdown in mid-2025, reinforcing the view that the labor market remains firm.

In response, Citigroup revised its forecast for the next Fed rate cut, pushing its projection from March to April 2026. Citi analysts, led by Veronica Clark, noted that the stronger employment data gives Federal Reserve officials little reason to rush into another rate reduction. The bank still anticipates gradual cooling in labor conditions through 2026, with a modest uptick in unemployment, though risks of sharper job losses remain.

Market expectations align with this cautious outlook. Polymarket traders currently assign a 92% probability that the Fed will hold interest rates steady at its March FOMC meeting, with just an 8% chance of a 25-basis-point cut. A recent Reuters poll also found that most economists expect no immediate rate change, with June viewed as the earliest likely window for easing.

Uncertainty surrounding Federal Reserve leadership adds another layer of complexity. President Trump has nominated Kevin Warsh to replace Jerome Powell, raising concerns about the future direction of U.S. monetary policy and central bank independence.

The ripple effects are visible in crypto markets. Bitcoin briefly surged above $67,000 following the jobs data release before stabilizing near that level, reflecting how closely digital assets track interest rate expectations and broader macroeconomic trends.