🚨 Fed Rate Cut Probabilities — Latest Update (as of mid-December 2025) 💰

The US Federal Reserve has been in easing mode in 2025, delivering three consecutive 25 basis point cuts (September, October, and December), bringing the federal funds rate to a target range of 3.50%–3.75%. Market expectations for further cuts have cooled due to a divided FOMC, sticky inflation around 3%, and mixed labor signals from delayed data.

Key Current Probabilities (CME FedWatch Tool & Market Consensus)

Recent December 2025 Meeting (Dec 9-10): The Fed delivered a 25 bps cut (to 3.50%-3.75%), but it was a "hawkish cut" with dissents and signals of a likely pause in early 2026. Pre-meeting odds were high (~80-87% for a cut), but post-meeting dot plot showed only one additional 25 bps cut expected in 2026 (median projection), unchanged from prior.

January 2026 FOMC Meeting (Jan 27-28): Markets price in ~77% chance of no change (hold steady), ~21% chance of 25 bps cut, and minimal odds of larger moves.

Overall 2026 Outlook: Fed dot plot projects gradual easing to ~3.00%-3.25% by end-2027. Markets anticipate 1-2 cuts total in 2026, with higher uncertainty due to divisions (e.g., some officials like Miran pushing for more aggressive cuts).

Factors Influencing Probabilities

Weak Labor Market: Delayed NFP data (combined Oct-Nov) showed cooling jobs (~50K added, unemployment at 4.5%), boosting cut odds earlier.

Inflation Persistence: Sticky at ~3%, making officials cautious.

Market Tools: CME FedWatch (futures-implied) and prediction markets (Polymarket/Kalshi) show cautious sentiment — no aggressive easing expected soon.

Stay tuned: The delayed November NFP (released Dec 16) could shift odds if it shows further weakness. A softer print might revive January cut bets!

⚠️ Trading Tip: Volatility remains high — focus on risk management and ethical strategies.

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