– Here’s what traders should expect
Poly Market data indicates a 96% chance of a 25 basis point rate cut by the U.S. Federal Reserve on Wednesday, representing the third cut this year. The Federal Open Market Committee (FOMC) meeting begins on Tuesday, December 9, during which the final expected economic summary report (SEP) for the year will be issued.
In the September report, the Federal Reserve anticipated three rate cuts in 2025 and one in 2026, but markets view these expectations as outdated now, anticipating updates on the possibility of deeper cuts in 2026. An internal division is evident in the Federal Reserve, as two officials voted against the October cut of 25 basis points, indicating a disagreement over the pace of easing.
Jerome Powell's press conference will be crucial, as the tone of his statements may be more impactful than the cut itself. Concerns about economic recession are growing, labor market signals are weakening, and political pressures are mounting, pushing expectations toward continued easing.
#### Details of the Federal Reserve Rate Cut
The Federal Reserve is expected to cut interest rates by 25 basis points amid increasing concerns about economic recession, a weakening labor market, and political influences. This comes after two previous cuts in 2025, with Poly Market showing a 96% probability before the FOMC Committee decision. Treasury yields have risen despite pricing in the cut, indicating an unusual cycle.
#### Poly Market Odds
Poly Market gives a 96% probability for a 25 basis point cut, based on data reflecting trader sentiment ahead of Wednesday's meeting.
#### What Traders Should Expect
- Focus on the SEP report: Investors expect clarity regarding the 2026 policy, as any change in expectations or wording could lead to volatility in stocks, bonds, and cryptocurrencies.
- Internal division: Signs of discord, such as inconsistent voting, may affect pricing in 2026; the unified position will be closely monitored against the divisions.
- Impact on Bitcoin and risk assets: Bitcoin is trading near $91,000, with expected volatility. If the Federal Reserve provides a 'hawkish cut' (cautioning against further easing), reactions to Bitcoin, Ethereum, and alternative currencies may be volatile. A dovish tone or slight optimism in the SEP report could open the door for a cryptocurrency rally by the end of the year by enhancing liquidity and risk appetite.
Key Quotes:
- "The central bank is widely expected to proceed with easing amid growing recession fears, weakening labor market signals, and political pressures."
- "The tone is much more important than the cut itself" during Powell's press conference.
- "If the Federal Reserve provides a 'hawkish cut' signaling caution about further easing, reactions to Bitcoin, Ethereum, and alternative currencies may be volatile. However, a dovish tone, or even slight optimism in the SEP report, could reopen the door for a cryptocurrency rally by the end of the year."
