Markets Predict Fed Pivot, Central Bank Remains Silent

Are financial markets getting ahead of the Fed ? While traders are heavily betting on a rate cut as soon as December, the Federal Reserve remains cautious and divided. This potential mismatch between anticipation and reality could disrupt macroeconomic balances and weigh heavily on risk assets.

Markets bet on an imminent rate cut

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

This anticipation accelerated rapidly, even though no official statement confirms an imminent shift in monetary policy. This mood change occurred following a week marked by market volatility, fueled notably by the release of new inflation data.

In comparison, the probability of rate holding remains at 32 %, while chances of a more aggressive adjustment, a 50 basis point cut, remain very low, around 2 %. The probability of a rate hike, meanwhile, is almost nil.

This change in sentiment is based on a fundamental trend, confirmed by Polymarket’s historical data. The aggregated chart shows a steady rise in cut expectations since October, followed by a sharp jump this week, indicative of a strategic repositioning by investors. They now seem convinced that the Fed is about to make a major turn. According to consulted data :

• The probability of a 25 basis point cut has risen from moderate levels to 67 % in a few days ;

• The scenario of status quo slips to 32 %, signaling a weakening of the central scenario of recent weeks ;

• Options for a rate hike are now low, with less than 1 % probability.

This dynamic reflects a collective shift in investor sentiment, who now bet on a monetary pivot before the end of the year, breaking with the measured tone of the Fed’s last statement.

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

Susan Collins calls for restraint

Faced with this growing optimism, official voices from the Federal Reserve do not validate, at this stage, the scenario of immediate monetary easing. Susan Collins, president of the Boston Fed, has been particularly clear in her recent remarks.

For her, current monetary policy is at an appropriate level, and any further decision must be based on tangible elements. “We need more data before supporting a new decision”, she stated, remaining undecided about her vote at the December 9-10 meeting. She also did not rule out explicit opposition to a rate cut if she judged it premature.

Other Fed members have made similar remarks, emphasizing the need to analyze more thoroughly the mixed signals from the U.S. economy: inflation slowing on one hand, but labor market weakening on the other.

Collins highlighted these uncertainties, stating that the risks related to inflation and the labor market situation require a finer reading before justifying a new monetary shift. This stance reveals growing internal division within the Fed’s monetary policy committee, whereas previous decisions had been more consensual.

Between institutional caution and market exuberance, the Fed rekindles hopes of a Bitcoin rebound thanks to a rate cut in December, now seen as a potential catalyst for risk assets.