Market Anticipates 25-Basis-Point Federal Reserve Rate Cut Amid Divided Outlook

Market participants are largely anticipating a 25-basis-point reduction in the federal funds rate by the Federal Reserve at its December 9-10, 2025 meeting, despite some calls for a more aggressive cut. Prediction markets, such as Kalshi and Polymarket, show probabilities hovering above 80% for a quarter-point cut, reflecting a significant shift in expectations. This sentiment contrasts with prominent voices like entrepreneur Anthony Pompliano, who publicly advocated for a larger adjustment.

"Interest rates are too high. The Fed should cut 50 basis points in December," stated Anthony Pompliano on social media.

The Federal Reserve's Open Market Committee (FOMC) has been grappling with a complex economic landscape, balancing concerns over a cooling labor market against persistent inflation that remains above its 2% target. Recent comments from officials, including New York Fed President John Williams, have signaled a willingness to consider further policy easing, while others remain cautious about inflation risks. The recent government shutdown also hindered the release of key economic data, further complicating the outlook for policymakers.

Analysts from major financial institutions like J.P. Morgan and Goldman Sachs have adjusted their forecasts, now largely expecting a 25-basis-point cut in December, citing a weakening labor market and a more moderate inflation picture. This potential move follows earlier rate cuts in September and October, bringing the target federal funds rate to a range of 3.75-4.00% prior to the upcoming decision. The debate within the Fed underscores the uncertainty surrounding the economic trajectory, with some members prioritizing support for employment and others emphasizing price stability.