Fed Officials Split as Markets Price in December Rate Cut

The Federal Reserve’s December policy decision is shaping up as a battle between officials worried about inflation’s persistence and those focused on weakening employment and demand.

Traders Bet on Rate Cut Despite Fed’s Growing Divide Over Inflation

According to the CME Fedwatch Tool, traders now assign a 65.4% probability that the central bank will lower the target range to 3.50–3.75%, down from the current 3.75–4.00%, at the Dec. 10, 2025, meeting.

The remaining 34.6% expect no change, pointing to market uncertainty about whether inflation or slowing growth will dominate the debate.

Prediction markets echo that split. On Polymarket, traders place a 71% chance on a 25-basis-point cut, while Kalshi reflects the same odds. Both show only a 2–3% probability of a deeper 50-point move and roughly 27–28% odds of the Fed holding steady.

Inside the central bank, the tension is clear. Some officials warn that tariff-driven price pressures and stubborn services inflation could derail progress toward the 2% target. Others, including San Francisco Fed President Mary Daly, argue that slowing job gains and weaker demand justify considering a cut to prevent a harder landing.

“Getting policy right will require an open mind and digging for evidence on both sides of the debate,” Daly wrote.

Read more: Arthur Hayes Says Bitcoin’s Next Surge Is Locked in With Fed Liquidity Flood Rising

Market sentiment has swung in recent weeks as officials deliver conflicting messages. While dovish members emphasize the cooling labor market, hawkish policymakers caution against premature easing that might reignite inflation expectations.

Atlanta Federal Reserve President Raphael Bostic says that the current labor market data is unclear and confusing, making it hard to draw a definitive conclusion.

“They are not clear enough to warrant an aggressive monetary policy response when weighed against the more straightforward risk of ongoing inflationary pressures,” Bostic added during a speech, Reuters reported on Wednesday.

As the countdown to December begins, traders remain tuned to upcoming inflation prints and employment reports that could tilt the odds further. For now, the markets are calling it a lean toward a 25-point cut—but with lingering hesitation amid one of the most divided Fed outlooks of the year.

FAQ 📊

• 🇺🇸 When is the next Fed meeting?

The next Federal Open Market Committee meeting is scheduled for Dec. 10, 2025.

• 📉 What does the CME FedWatch Tool show?

It shows a 65.4% chance of a 25-basis-point rate cut.

• 💬 What do prediction markets say?

Both Polymarket and Kalshi give roughly 71% odds for a 25-point cut, aligning closely with futures data.

• 📈 Why is the Fed divided?

Officials disagree on whether sticky inflation or weakening labor data poses the bigger risk heading into December.