Markets expect rate cut in December despite Fed warnings

Are financial markets getting too far ahead of the Fed? While traders are massively betting on a rate cut as early as December, the Federal Reserve remains cautious and divided. This possible gap between anticipation and reality could upset macroeconomic balances and weigh heavily on risk assets.

Markets are betting on an imminent rate cut

The gap is widening between the Federal Reserve and market expectations. According to the latest figures, traders assess the probability of a 25 basis point rate cut at the Fed meeting scheduled for December 9 and 10 at 67%.

This anticipation has accelerated rapidly, even though no official statement confirms an imminent change in monetary policy. This change in mood occurred following a week marked by volatility on the markets, fueled in particular by the publication of new figures on inflation.

In comparison, the probability of maintaining rates stagnates at 32%, while the chances of a more aggressive adjustment, a reduction of 50 points, remain very low, around 2%. The probability of an increase, for its part, is almost zero.

This change in sentiment is based on an underlying trend, confirmed by historical data from Polymarket. The aggregate chart shows a steady rise in downside expectations since October, followed by a sharp jump this week, indicative of a strategic repositioning of investors. The latter now seem convinced that the Fed is preparing to make a major turning point. According to the data consulted :

• The probability of a 25 basis point cut rose from moderate levels to 67% in a matter of days;

• The status quo scenario slides at the same time to 32%, signaling a weakening of the central scenario in recent weeks;

• Upside options are now low, with less than 1% probability.

This dynamic reflects a collective change in mood among investors, who are now banking on a monetary pivot before the end of the year, breaking with the measured tone of the Fed's latest press release.

This divergence between on-chain market data and the official line of the central bank fuels a form of friction which could crystallize as the decision approaches. Operators now seem ready to get ahead of the Fed at the risk of being disappointed if it does not validate their expectations in the short term.

Susan Collins calls for restraint

Faced with this growing optimism, the official voices of the Federal Reserve do not validate, at this stage, the scenario of immediate monetary easing. Susan Collins, president of the Boston Fed, was particularly clear during her latest interventions.

For her, current monetary policy is at the right level, and any additional decisions must be based on tangible elements. “We need more data before we can support a new decision”she declaredsaying she remains undecided about her vote at the December 9–10 meeting. She has not ruled out explicit opposition to a rate cut if she considers it premature.

Other members of the Fed made similar comments, insisting on the need to analyze in more depth the contrasting signals from the American economy: slowing inflation on the one hand, but weakening of employment on the other.

Collins highlighted these uncertainties, saying that the risks linked to inflation and the labor market situation require a more detailed reading before justifying a new monetary inflection. This positioning reveals a growing internal division within the Fed's monetary policy committee, while previous decisions had been more consensual.

Between institutional caution and runaway markets, the Fed is reviving hopes of a rebound in Bitcoin thanks to a rate cut in December, now seen as a potential catalyst for risky assets.