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The current expectation for a rate cut by the Federal Reserve in December has significantly increased, with the core focus on the interest rate meeting on December 9-10. The market and institutions generally bet on a 25 basis point rate cut.
1. Core Market Expectations
According to the latest data from CME's "FedWatch" (as of December 6), the probability of a 25 basis point rate cut in December is 87%, while the probability of maintaining the current interest rate range of 3.75%-4.00% is only 13%. At the same time, the market predicts a 64.1% probability of a cumulative 25 basis point rate cut in January next year, and the probability of a cumulative 50 basis point rate cut rises to 27%.
2. Institutional Prediction Dynamics
1. Morgan Stanley (revised on December 6): Re-predicts a 25 basis point rate cut in December, having previously delayed expectations to 2026 due to strong employment data in September. Its core basis is that senior officials of the Fed released clear dovish remarks ahead of the meeting, and the market pricing has basically locked in the rate cut, making it highly probable that the Fed will not surprise the market. It also expects an additional 25 basis point cut in January and April 2026, with the terminal rate dropping to 3.00%-3.25%.
2. Bank of America (revised on December 2): Adjusted from "maintaining the interest rate" to predicting a 25 basis point rate cut in December, citing reasons including a weak U.S. labor market (November's private sector jobs decreased by 32,000, the largest drop in nearly three years), dovish statements from Fed officials suggesting an early rate cut, and Powell not refuting the market's pricing for a rate cut. It expects only 25 basis point cuts in June and July 2026, with a terminal rate target consistent with Morgan Stanley.
3. Consensus Among Major Investment Banks: Currently, most institutions such as Goldman Sachs, JPMorgan Chase, and BlackRock support a 25 basis point rate cut in December, with only a few institutions like Standard Chartered still insisting on maintaining the interest rate.
3. Key Driving Factors
1. Weak Economic Data: The U.S. labor market has clearly cooled, with November's "non-farm" employment data showing the largest drop in nearly three years, presenting a stagnant state of "no hiring, no layoffs," providing data support for a rate cut.
2. Dovish Signals from Officials: Recent dovish remarks from key officials such as New York Fed President Williams and Fed Governor Waller suggest a tendency towards loose monetary policy, becoming a key incentive for institutions to raise rate cut expectations.
3. Expectations of Leadership Changes: White House National Economic Council Director Hassett (a popular candidate for the next Fed Chair) holds a dovish stance, advocating for a quick rate cut to avoid an economic recession. $ETH
1. Core Market Expectations
According to the latest data from CME's "FedWatch" (as of December 6), the probability of a 25 basis point rate cut in December is 87%, while the probability of maintaining the current interest rate range of 3.75%-4.00% is only 13%. At the same time, the market predicts a 64.1% probability of a cumulative 25 basis point rate cut in January next year, and the probability of a cumulative 50 basis point rate cut rises to 27%.
2. Institutional Prediction Dynamics
1. Morgan Stanley (revised on December 6): Re-predicts a 25 basis point rate cut in December, having previously delayed expectations to 2026 due to strong employment data in September. Its core basis is that senior officials of the Fed released clear dovish remarks ahead of the meeting, and the market pricing has basically locked in the rate cut, making it highly probable that the Fed will not surprise the market. It also expects an additional 25 basis point cut in January and April 2026, with the terminal rate dropping to 3.00%-3.25%.
2. Bank of America (revised on December 2): Adjusted from "maintaining the interest rate" to predicting a 25 basis point rate cut in December, citing reasons including a weak U.S. labor market (November's private sector jobs decreased by 32,000, the largest drop in nearly three years), dovish statements from Fed officials suggesting an early rate cut, and Powell not refuting the market's pricing for a rate cut. It expects only 25 basis point cuts in June and July 2026, with a terminal rate target consistent with Morgan Stanley.
3. Consensus Among Major Investment Banks: Currently, most institutions such as Goldman Sachs, JPMorgan Chase, and BlackRock support a 25 basis point rate cut in December, with only a few institutions like Standard Chartered still insisting on maintaining the interest rate.
3. Key Driving Factors
1. Weak Economic Data: The U.S. labor market has clearly cooled, with November's "non-farm" employment data showing the largest drop in nearly three years, presenting a stagnant state of "no hiring, no layoffs," providing data support for a rate cut.
2. Dovish Signals from Officials: Recent dovish remarks from key officials such as New York Fed President Williams and Fed Governor Waller suggest a tendency towards loose monetary policy, becoming a key incentive for institutions to raise rate cut expectations.
3. Expectations of Leadership Changes: White House National Economic Council Director Hassett (a popular candidate for the next Fed Chair) holds a dovish stance, advocating for a quick rate cut to avoid an economic recession. $ETH
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.
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