Fed December Rate Cut: Market Odds Collapse from 95% to 50% as Powell Warns “Not a Foregone Conclusion”

Meta Description: FOMC December 9-10 meeting uncertainty rises as Powell says rate cuts “far from foregone.” Market odds dropped from 95% to 50%. How will crypto markets react?

Following the Federal Reserve’s October 29 decision to cut rates by 25 basis points, bringing the federal funds rate to 3.75%-4%, Chair Jerome Powell delivered an unexpectedly hawkish message that has transformed market expectations for the December 9-10 FOMC meeting. Powell’s statement that a further rate cut “is not a foregone conclusion—far from it” sent shockwaves through financial markets, causing Bitcoin to drop 5% and triggering a dramatic reassessment of monetary policy trajectory.

Market-implied probabilities for a December cut have collapsed from 95% just three weeks ago to approximately 50% as of November 17, according to the CME FedWatch Tool. This abrupt shift reflects a Federal Reserve divided by “strongly differing views” among policymakers, a government shutdown that has blinded officials to crucial economic data, and persistent inflation that complicates the central bank’s dual mandate of maintaining full employment while stabilizing prices.

For cryptocurrency markets, which have historically moved in tandem with Federal Reserve liquidity cycles, the December meeting represents a critical inflection point. This article examines the factors driving Fed uncertainty, the scenarios traders should prepare for, and the strategic implications for crypto investors navigating this high-stakes policy decision.

What Changed: From Near-Certainty to Coin Toss

The Federal Reserve’s October 29 meeting delivered a 25 basis point rate cut as expected, but Chair Powell’s press conference comments caught markets off guard. When asked about December, Powell emphasized that “there were strongly differing views on how to proceed” and that policy “is not on a preset course.” His unusually direct language—calling a December cut “far from” guaranteed—marked a significant departure from the dovish tone markets had priced in.

The October decision itself revealed internal division, with two dissenting votes: Fed Governor Stephen Miran preferred a larger 50 basis point cut to support the labor market, while Kansas City Fed President Jeffrey Schmid advocated for holding rates steady due to inflation concerns. This 10-2 vote split highlighted the challenging balance policymakers face between addressing labor market weakness and managing price pressures that remain stubbornly above the Fed’s 2% target.

Several factors have contributed to the shift in expectations:

Government Shutdown Data Blackout: The ongoing U.S. government shutdown, which began October 1, has suspended release of critical economic indicators including the Labor Department’s September jobs report and the Personal Consumption Expenditures price index—the Fed’s preferred inflation measure. Powell acknowledged this challenge directly, saying “What do you do if you’re driving in the fog? You slow down.” The inability to access “gold standard” government data creates uncertainty that could favor caution.

Inflation Remains Elevated: The September Consumer Price Index showed inflation ticking up to 3%, well above the Fed’s 2% target. While Powell has expressed hope that tariff-related price pressures will prove temporary, recent data has not provided sufficient evidence that inflation is on a sustainable path back to target levels.

Hawkish Committee Members: Several Federal Open Market Committee members have struck cautious tones in recent weeks. St. Louis Fed President Alberto Musalem stated “there’s limited room for further reductions without monetary policy becoming overly accommodative,” while even typically dovish Chicago Fed President Austan Goolsbee acknowledged the need to monitor inflation risks closely.

The Divided Fed: Three Camps Emerge

Understanding the December meeting requires recognizing that the Federal Reserve is far from unified in its assessment of appropriate policy:

The Dovish Camp (Miran, Waller): Fed Governor Stephen Miran has consistently advocated for aggressive easing, dissenting in favor of a 50 basis point cut at both September and October meetings. Governor Christopher Waller, while initially calling for caution, delivered remarks on November 17 arguing that the labor market is approaching “near stall speed” and that further cuts are necessary to prevent unemployment from rising. Waller’s position carries significant weight given his influence within the committee.

The Hawkish Camp (Schmid, Bowman, Musalem): Kansas City Fed President Jeffrey Schmid preferred no rate change at the October meeting, citing inflation concerns. Fed Governor Michelle Bowman has similarly expressed skepticism about the need for cuts, while St. Louis Fed President Alberto Musalem has warned against monetary policy becoming “overly accommodative.” These members prioritize inflation control over labor market support.

The Pragmatic Middle (Powell, Jefferson, Williams): Chair Powell, along with Vice Chair Philip Jefferson and New York Fed President John Williams, appear to be navigating between these camps. Powell’s recent comments suggest a desire to build consensus while maintaining optionality, reflecting what analysts at Evercore ISI describe as a “conciliatory posture” aimed at preventing the committee from fracturing publicly.

Goldman Sachs Research maintains its forecast for a December cut despite Powell’s hawkish tone, arguing that labor market weakness “is genuine” and that Powell himself acknowledged monetary policy remains “modestly restrictive”—a condition the Fed aims to ease. However, the path to consensus remains uncertain, particularly given that FOMC voting membership will change in January, potentially altering the balance of power.

Scenarios for December 9-10: What Traders Should Prepare For

Scenario 1: 25 Basis Point Cut (Probability: ~50%)

Goldman Sachs Research base case: The Fed proceeds with another quarter-point reduction, bringing the federal funds rate to 3.5%-3.75%. This outcome would reflect continued prioritization of labor market support, with Powell emphasizing that policy remains “modestly restrictive” and that gradual cooling in employment warrants further easing.

Crypto Market Implications:

• Immediate reaction: Bitcoin likely rallies 3-5% on relief that the easing cycle continues
• Medium-term: Risk assets benefit from easier financial conditions and dollar weakness
• Strategic positioning: Positive for crypto as liquidity conditions improve

Key Quote from Goldman: “Labor market data are unlikely to send a convincingly reassuring message by the time of the FOMC meeting in December… Because the FOMC does not want further cooling, this is likely to be a strong argument for another cut.”

Scenario 2: Hawkish Cut with Pause Signal (Probability: ~30%)

Compromise scenario: The Fed delivers a 25 basis point cut but signals this may be the last reduction for several months, emphasizing the need to assess incoming data before proceeding further. Powell would likely stress that the January change in FOMC voting membership will allow fresh perspectives on policy direction.

Crypto Market Implications:

• Immediate reaction: Mixed—initial relief from the cut, followed by selling on hawkish guidance
• Medium-term: Rangebound price action as markets digest pause implications
• Strategic positioning: Neutral to slightly negative; reduced expectations for 2026 easing

Scenario 3: Hold Steady (Probability: ~20%)

Hawkish surprise: The Fed pauses rate cuts entirely, citing elevated inflation, uncertainty from the data blackout, and the need for more evidence that labor market weakness is genuine rather than statistical noise. This outcome would align with Powell’s “driving in the fog, you slow down” analogy.

Crypto Market Implications:

• Immediate reaction: Bitcoin likely drops 5-8% on surprise hawkish stance
• Medium-term: Dollar strength and reduced liquidity pressure risk assets
• Strategic positioning: Bearish for crypto; suggests Fed prioritizes inflation over growth

Crypto Trader Playbook: Positioning for December Volatility

The December 9-10 FOMC meeting will likely generate significant volatility across crypto markets regardless of outcome. Traders should adopt strategies that account for multiple scenarios:

Pre-Meeting Positioning (December 1-8):

• Reduce leverage: High uncertainty environments favor smaller position sizes and lower leverage to avoid forced liquidations
• Set alerts at key Bitcoin levels: $92,000 (support), $100,000 (psychological resistance), $107,000 (death cross zone)
• Monitor DXY (Dollar Index): A strengthening dollar ahead of the meeting suggests markets are pricing in hawkish outcomes

During the Meeting (December 9, 2:00 PM ET):

• Avoid trading in the first 15 minutes: Initial market reactions are often misleading as algorithms digest headlines
• Wait for Powell’s press conference (2:30 PM ET): The statement matters, but Powell’s tone and Q&A responses often drive larger moves
• Watch bond yields: If 10-year Treasury yields spike on the decision, crypto will likely face pressure; falling yields support crypto

Post-Meeting Strategy (December 10 onward):

• Cut scenario: Consider adding to long positions if Bitcoin holds $95,000 and begins reclaiming $100,000
• Hold scenario: Expect 5-10% drawdown; look for support at $85,000-$90,000 range as accumulation zone
• Hawkish cut scenario: Reduce exposure temporarily; wait for clearer trend establishment before re-entering

MEXC Risk Management Tools:

• Take-profit orders: Lock in gains if Bitcoin rallies toward $105,000-$107,000 resistance
• Stop-loss orders: Protect capital with stops 5-7% below entry points to avoid catastrophic losses
• Trailing stops: Capture upside while protecting against reversals during volatile post-FOMC sessions
• Grid trading bots: Capitalize on range-bound volatility if Bitcoin consolidates post-decision

Beyond December: January Brings New Variables

Even after the December decision, uncertainty will persist. The FOMC’s voting membership changes in January 2026, with hawkish members like Kansas City Fed President Jeffrey Schmid and Boston Fed President Susan Collins rotating out of voting positions, while Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan rotate in. This shift could alter the balance of power and potentially open the door to resumed easing if labor market weakness continues.

Additionally, Chair Powell’s term expires in May 2026, creating succession uncertainty. President Trump has been vocal about his preference for a more accommodative Fed and has recently appointed Stephen Miran to the Federal Reserve Board specifically for his dovish views. This political dimension adds another layer of complexity to forward guidance.

Goldman Sachs Research projects two additional 25 basis point cuts in March and June 2026, bringing the terminal rate to 3.0%-3.25% by mid-2026. However, these forecasts depend heavily on labor market data continuing to show weakness and inflation moving closer to the 2% target—outcomes that remain uncertain.

Conclusion: Uncertainty Creates Opportunity for Prepared Traders

The Federal Reserve’s December 9-10 meeting has evolved from a “done deal” rate cut to a genuine toss-up, reflecting the complex challenges facing monetary policymakers as they balance inflation concerns against labor market weakness. Powell’s unusually direct warnings, combined with the data blackout from the government shutdown and internal FOMC divisions, have created a fog of uncertainty that extends well beyond December.

For cryptocurrency markets, which have thrived during periods of easy monetary policy and struggled when liquidity tightens, the Fed’s trajectory over the next 3-6 months will be a primary driver of price action. Bitcoin’s death cross pattern, record ETF outflows, and correlation with risk assets mean that Fed policy carries outsized importance for crypto investors in this environment.

Rather than attempting to predict the outcome, disciplined traders should prepare for multiple scenarios, employ robust risk management, and recognize that volatility itself presents opportunities. Whether the Fed cuts, holds, or delivers a hawkish cut with guidance, the key is positioning to capitalize on the market’s reaction rather than betting on a specific outcome.

The coming weeks will test both the Fed’s ability to navigate conflicting mandates and crypto traders’ ability to adapt to rapidly shifting conditions. Those who approach December with flexibility, proper position sizing, and clear risk parameters will be best positioned to navigate whatever Powell and his colleagues decide.

Trade Crypto Through Fed Volatility on MEXC: MEXC offers comprehensive tools to navigate macro event volatility, including real-time economic calendar integration, advanced order types (TP/SL, trailing stops, conditional orders), and leverage options up to 125x on major crypto pairs. With zero maker fees during MEXC’s 0-Fee Fest promotion, traders can execute strategies cost-effectively while managing risk through volatile Fed decision windows.

Disclaimer:This content is for educational and reference purposes only and does not constitute any investment advice. Digital asset investments carry high risk. Please evaluate carefully and assume full responsibility for your own decisions.