Market Pricing of Fed Rate Cuts Traders are increasingly confident the Fed will cut rates at the December 10, 2025 FOMC meeting, pricing in an 86% chance of a quarter-point move and just a 23% likelihood of another cut in January 2026. Image: Deutsche Bank
Market-Implied Fed Funds Rate and 2-Year U.S. Inflation Swap Current market pricing of Fed rate cuts indicates a pivot from inflation worries to growth concerns, suggesting investors expect the Fed to prioritize economic stability over aggressive inflation control. Image: Deutsche Bank
Probability of Fed Rate Cut After the CPI data release, traders now estimate an 82.5% chance of a 25 basis point rate cut at the FOMC meeting on December 18, 2024. Image: CME GRoup
U.S. GDP Growth Forecasts Goldman Sachs is more bullish on U.S. GDP growth than the consensus and the FOMC’s forecast, reflecting their confidence in a stronger performance for the U.S. economy. Image: Goldman Sachs Global Investment Research
Behavior of the S&P 500 during Recent Fed Events Will the S&P 500 continue to dive at the next FOMC meeting? Image: Nomura
S&P 500 – Quantity-On-Loan on the SPY U.S. ETF This short interest proxy on SPY US ETF has increased significantly since the FOMC meeting. Image: J.P. Morgan
The Market Has Correctly Called Each Fed Rate Decision since 2010 And since 1994, seven days before a FOMC meeting, the market has been accurate 95% of the time. You may also like “The Fed Funds Market Is Rarely Wrong About the Next FOMC Meeting.” Image: Deutsche Bank
Most Important Variables Explaining the S&P 500’s YoY Return Today, the two most important variables explaining the S&P 500’s YoY return: FOMC rate change and U.S. hard economic data. Image: Arbor Research & Trading LLC
The U.S. Unemployment Rate Is Historically Low But the FOMC projection suggests that the unemployment rate cannot improve indefinitely. Image: Federal Reserve Bank of Richmond
What About the Predictive Power of the Fed? As former Fed policymaker Narayana Kocherlakota said in 2016: “Don’t rely on FOMC forecasts of future fed funds rates.” Why? Because the economy is often shaken by crises and does not evolve as expected. Image: Hedgeye Risk Management LLC