Fed December Rate Cut Odds Drop as Markets Reassess

 StocksRunner
 
  StocksRunner
 
Follow  Message
 
 
 
Find out what happening right now and get all the pieces of the puzzle on important data activity before the major news sources break the story and see what are the trends
 

•  13 Nov 2025
 

The certainty that defined market expectations for months is crumbling. For the first time in this cycle, the probability of a Federal Reserve rate cut in December has slipped below 50%, transforming what traders priced as a sure thing into a genuine coin flip. Jerome Powell warning echoes louder each day "No cut is guaranteed"

If you've been positioning your portfolio around the assumption of continued easing, it's time to recalibrate. The game has changed, and it's not just about inflation prints or employment data anymore. The Fed is flying blind, and that creates a treacherous environment for risk assets.

Here's what makes this moment uniquely challenging: the four-week government shutdown froze the statistical agencies that produce the macro data the Fed relies on. Employment reports, inflation readings, retail sales figures all delayed, incomplete, or simply missing. The White House admits that even after reopening, much of the data released before December decision will be partial or unrepresentative. Some won't be published at all.

Think about what this means. The most powerful central bank in the world must decide on interest rates while openly admitting they're operating with "eyes closed." Powell has repeatedly emphasized that decisions would be made "according to the data we receive" But when there's no data, there's no informed decision. And when there's no clarity from the Fed, there's no confidence in the markets.

Powell already planted the seeds of doubt at October meeting. Yes, the Fed cut rates for the second consecutive time, bringing the range down to 3.75%-4%. But in the press conference, he made it crystal clear: further cuts in December are "absolutely not a given, far from it" He acknowledged "very different views within the committee about the path forward," especially against the backdrop of the government data vacuum.

Since then, Fed officials have only hardened their stance. Susan Collins from the Boston Fed, previously viewed as a moderate dove, now sees a "relatively high bar" for continued easing without significant labor market deterioration. She explicit rates likely need to stay stable "for some time longer" particularly without official inflation data. Mary Daly admits a decision now would be "too early," while Neel Kashkari points to "mixed signals" in the economy inflation still hovering around 3% versus the 2% target, alongside a labor market that is only partially weakened.

The internal split at the Fed makes December decision a genuine battle. On the cautious side stand Collins, Musalem from St. Louis, and Vice Chair Jefferson, emphasizing the risk of persistent inflation and preferring to slow the pace of cuts. On the more dovish side are figures like Miran, who supported a sharper half-point cut at the last meeting, along with several governors concerned about labor market softening. Caught in the middle are Daly and Kashkari, admitting the data is mixed and they need to keep an "open mind" until the last moment.

This uncertainty is reshaping market behavior in real time. Technology stocks and AI names that rode the cheap money narrative to new highs are now giving back gains. When rate cut odds fluctuate around 50% and senior Fed officials hint at a pause, taking profits becomes the rational move. The recent pullback in tech indices and weakness in growth stocks reflects the gradual shift into risk-off mode. Valuations built on assumptions of continued easing suddenly look vulnerable.

The crypto market mirrors this caution. BTC has traded below $100,000 three times this month, unable to sustain breakouts amid Fed uncertainty.

Treasury markets are sending the same message. Yields on government bonds have climbed recently, partly driven by a relatively weak long-term bond auction that underperformed expectations. The pattern throughout 2025 shows disappointing 30-year auctions. To convince investors to buy US government debt, they are demanding higher interest rates. This does not just push yields up; it signals to the Fed that the market itself is not betting on significantly lower rates anytime soon.

For traders and investors, this represents a fundamental shift. For six months, markets operated as if December rate cut was practically guaranteed. Now reality has reasserted itself: a Fed working without complete data, inflation still above target, bond auctions signaling demands for higher rates, and a fractured monetary policy committee. The equation has reintroduced genuine risk.

Between now and the December decision, every piece of inflation or employment data that does get released could swing the probability. But right now, if you're still positioned for certain easing, you're fighting the new reality. The era of guaranteed rate cuts has ended, and the market is pricing accordingly. Whether the Fed ultimately cuts or pauses, the message is clear nothing is certain anymore, and your portfolio positioning should reflect that truth.

The volatility ahead isn't a bug it's a feature of a central bank navigating without instruments in turbulent conditions. Smart money is adapting to uncertainty rather than fighting it.

View All Headlines