Why Markets Expect Another Fed Rate Cut In December

As 2025 draws to a close, the United States dollar remains at the center of global financial attention. Investors, importers, exporters, and currency traders are closely monitoring every economic release ahead of the Federal Reserve’s December 9–10 meeting. With another interest rate cut widely anticipated, the USD stands at a pivotal point that could influence currency flows and broader financial conditions heading into 2026.

The Federal Open Market Committee has already lowered interest rates twice this year, first in September and again in October. These adjustments brought the federal funds rate into a target range of three point seventy-five to four percent. Now, markets expect the Federal Reserve to ease monetary conditions once again.
Futures traders are pricing in an eighty-seven to ninety percent probability of a twenty-five basis point cut. This strong expectation is supported by a wave of dovish signals from key policymakers. One of the most influential came from Governor Christopher Waller, who suggested that ongoing labor market softness may justify further easing. His remarks strengthened confidence that the Federal Reserve is prepared to maintain economic stability as the new year approaches.

Major Wall Street institutions have also revised their outlooks. Firms including Morgan Stanley, JPMorgan, and Bank of America now anticipate a December cut, along with further easing in 2026 if economic growth remains steady. Earlier in the year, when inflation appeared more persistent, the likelihood of a cut fell to as low as twenty-nine percent. However, recent economic data has revived expectations of a continued dovish policy path.

For the USD, these expectations apply additional downward pressure. Lower interest rates generally reduce the appeal of dollar-denominated assets, prompting capital to shift into higher-yielding currencies.

Cooling Inflation Pushes The USD Lower

Inflation has been the most influential factor shaping the Fed’s stance. Recent data shows a clear trend of moderating price growth across key sectors. The Consumer Price Index for September rose three percent year over year, up slightly from two point nine percent but still well below previous highs. This level provides the Fed with justification to adopt a more accommodative policy approach.

The Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation measure, increased just zero point three percent in September. Core PCE, which excludes food and energy, registered at two point eight percent. Both figures came in softer than economists projected, sending a fresh wave of disinflation signals through financial markets.

Make money without lifting your fingers: Start using a world-class auto trading solution 

How To Buy Lucky Block

Note: Learn2.trade is not a financial advisor. Do your research before investing your funds in any financial asset, product, or event. We are not responsible for your investment results.