The Federal Reserve is set to meet next week, and current market data suggests a high probability of a 0.25% interest rate cut. While earlier in November the odds leaned toward the Fed holding rates steady, that expectation has since shifted. Following Fed Chair Jerome Powell’s comment that a cut was “not a foregone conclusion”, futures markets briefly priced in a 70% chance of no change:
But that sentiment didn’t last. Now, CME FedWatch shows less than a 12% chance of a hold. On Polymarket, more than 90% of traders are betting on a rate cut.
What Changed?
Recent economic indicators have played a major role in shifting expectations. Job market data has softened slightly, with unemployment claims rising and a reported increase in job cuts. Inflation remains above the Fed’s 2% target but hasn’t accelerated. With signs of gradual cooling in the labor market and no major inflation spikes, the Fed appears to have room to lower rates without triggering immediate concern.
In addition to rate cut expectations, broader financial conditions are shifting. Quantitative tightening has ended, and both the Treasury General Account and the Reverse Repo Program are being drawn down. These changes contribute to increased liquidity in the system, which can further support risk-taking across asset classes, including crypto.
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Impact on Crypto and Markets
Lower interest rates typically benefit risk assets, including cryptocurrencies. When returns on traditional fixed-income investments drop, investors often look to alternatives like stocks and digital assets. Historically, Bitcoin has shown stronger performance in lower-rate environments.
Crypto markets have faced downward pressure in recent weeks, partly due to concerns over monetary policy. A confirmed rate cut could ease some of that pressure and support a broader rebound.
Read also: How Interest Rates Impact Bitcoin: Exploring the Correlation
What Comes Next
The Fed’s December decision will signal how it plans to approach 2026. With expectations now centered around a more accommodative stance, investors across sectors will be watching closely. If the cut goes through, it would mark the third in a row, following September and October’s moves – reinforcing the view that the tightening cycle is officially over.
