The Fed's third rate cut could come sooner than expected

Investors are strengthening their bets on a cut in key rates from the US Federal Reserve in December, according to the CME FedWatch tool. The likelihood of a 25 basis point cut jumped to 74.5%, up from 66% last week.

Fed eyes third rate cut in December

Market optimism is based on the recent trajectory of the Fed, which has already made two cuts this year: a first of 50 basis points in September, followed by a reduction of 25 points in November which brought the rate in a range of 4.5%-4.75%.

Governor Christopher Waller reinforced these expectations during a Dec. 2 conference in Washington, saying “ inclined to support a decline“, while specifying that its final decision will depend on future economic data.

This potential third decline would be a continuation of progressive monetary easing, aiming to reduce rates to a range of 4.25% to 4.5%. John Williams, president of the New York Fed, confirmed this orientation by evoking a downward trajectory “ over time“, although without firm commitment on the timing.

Markets are impatiently awaiting Jerome Powell's public intervention scheduled for December 4 in New York, after he adopted a more cautious tone in November, declaring that there was ” no urgency to lower rates“.

A context conducive to the rise of crypto assets

Bitcoin continues its spectacular progression that began after Trump's victory and the first rate cuts, having already smashed its historic record to $76,951 in November. The crypto is now trading around $95,800, down slightly by 2% over 24 hours, but still in a strongly bullish dynamic.

The CME FedWatch tool, which bases its calculations on 30-day futures contracts, reflects a notable shift in investor expectations. The 8.5 percentage point increase in the probability of a cut within a few days reflects growing confidence in continued monetary easing.

This trend takes place in a particularly favorable context, combining an accommodative monetary policy and Trump's promises of a regulatory framework more favorable to cryptos. Many analysts are revising their targets upwards, now anticipating bitcoin at $100,000 before the end of the year.