BIG NUMBER | 90%+ | December Rate Cut Seems All But Assured

Core Insights - The Federal Reserve is expected to cut interest rates next week, with current market-implied probabilities indicating a rate cut above 90% [5][7] - The federal funds rate is projected to range between 3.50% and 3.75% following the anticipated cut [5] - There is uncertainty among Fed members regarding the necessity of further rate cuts in 2026, influenced by upcoming leadership changes and economic conditions post-government shutdown [5][13] Market Reactions - Following the October Fed meeting, market expectations for a December rate cut significantly decreased from 100% to less than 30% [1][2] - The tech-heavy Nasdaq-100 index experienced a nearly 9% decline from peak to trough as the likelihood of a rate cut diminished [2] Economic Context - The lack of economic data during the government shutdown contributed to investor confusion regarding the Fed's future actions [2] - The Fed has concluded its pandemic-era policy of balance sheet reduction, which may affect long-term interest rates and the yield curve [13]