The Third Rate Cut By The Fed Could Come Sooner Than Expected

Investors are doubling down on bets for a rate cut by the U.S. Federal Reserve in December, according to the CME FedWatch tool. The probability of a 25 basis point reduction has surged to 74.5%, up from 66% last week.

The Fed is considering a third rate cut in December

Market optimism is based on the Fed’s recent trajectory, which has already seen two rate cuts this year: the first was a 50 basis point cut in September, followed by a 25 basis point reduction in November that brought rates into a range of 4.5%-4.75%.

Governor Christopher Waller reinforced these expectations during a conference on December 2 in Washington, indicating he is “inclined to support a cut,” while noting that his final decision would depend on forthcoming economic data.

This potential third cut would continue a trend of gradual monetary easing, aiming to bring rates into a range of 4.25% to 4.5%. John Williams, president of the New York Fed, confirmed this direction by mentioning a downward trajectory “over time,” although he did not commit firmly to the timing.

Markets are eagerly awaiting the public appearance of Jerome Powell scheduled for December 4 in New York, after he adopted a more cautious tone in November, stating there was “no urgency to lower rates.”

A favorable context for the rise of crypto assets

Bitcoin continues its spectacular rise that began after the Trump victory and the initial rate cuts, already shattering its all-time high of $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 trend.

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 rate cut over a few days indicates growing confidence in the continuation of monetary easing.

This trend is part of a particularly favorable context, combining an accommodative monetary policy and Trump’s promises for a more crypto-friendly regulatory framework. Many analysts are raising their targets, now anticipating a bitcoin at $100,000 before the end of the year.