Market expectations for a Federal Reserve interest-rate cut in December have surged dramatically, with Kalshi traders now pricing the probability at 85%. This marks the strongest consensus yet that the Fed may pivot sooner than previously anticipated, driven by weakening economic data, cooling inflation, and a shift in market sentiment.
The rapid rise in rate-cut odds is one of the most significant macro developments of the month. Search interest in terms such as “Kalshi December rate cut odds,” “85% Fed cut probability,” and “interest-rate forecast December 2025” is surging as investors position themselves ahead of potential central-bank action.
Why December Rate Cut Odds Are Rising So Fast
Several macroeconomic signals are converging, pushing prediction markets sharply toward expecting a December policy move.
Cooling Inflation Provides Space for Fed Easing
Recent CPI and PCE data indicate that inflation is steadily declining toward the Fed’s target range. Softening in shelter costs and core services the most stubborn components has given traders confidence that inflation may no longer justify maintaining restrictive rates.
Labor Market Weakness Emerging
Unemployment claims have risen, job openings are falling, and wage growth is slowing. As the labor market loses momentum, the Fed faces growing pressure to support economic stability.
Bond Yields Signal Aggressive Dovish Shift
Treasury yields have dropped notably in recent weeks, reflecting expectations of a lower-rate environment. The bond market is often seen as the most reliable predictor of Fed policy moves, and its current trajectory aligns closely with Kalshi’s 85% odds.
Fed Communication Turning Softer
Recent remarks from several Federal Reserve officials show increasing openness to rate cuts should economic conditions deteriorate. While the Fed has not explicitly committed to December, the tone has become more balanced even slightly dovish.
Together, these factors explain the sudden spike in December cut expectations across prediction markets, futures data, and institutional projections.
How Markets Are Reacting to the 85% Probability
Financial markets are preparing for what many believe could be the first cut since the Fed began its aggressive tightening cycle.
Stocks Positioned for a Year-End Rally
Lower interest rates typically boost equities, particularly growth and technology sectors. Traders are already positioning for a potential December “Santa Rally.”
Crypto Markets Showing Early Strength
Bitcoin, Ethereum, and other digital assets historically outperform when liquidity increases. The 85% odds have triggered renewed accumulation across major cryptocurrencies.
Dollar Weakens as Yield Expectations Decline
The U.S. Dollar Index (DXY) has pulled back, reflecting reduced demand for high-yield dollar assets.
Bond Prices Rise Sharply
As yields fall, bond prices climb making fixed-income markets one of the biggest beneficiaries of the rising rate-cut odds.
Could the Fed Still Hold Off?
Yes despite the sharp rise in expectations, the decision is not guaranteed.
If inflation rebounds, wage growth accelerates, or certain economic segments stabilize unexpectedly, the Fed may choose to delay cuts until early 2026. However, prediction markets like Kalshi where traders put real money at stake tend to reflect sentiment shifts faster than traditional institutions.
For now, 85% odds represent the strongest market conviction yet that the pivot is near.
FAQs
1. What are the odds of a December rate cut right now?
Kalshi traders are pricing an 85% chance of a December Federal Reserve rate cut.
2. Why are expectations rising?
Cooling inflation, weakening labor data, falling bond yields, and softer Fed communication are all contributing to higher expectations.
3. Does this guarantee a December cut?
No the Fed will wait for further data. But market confidence is rapidly building.
4. How would a rate cut impact markets?
Stocks and crypto typically rally, bond yields fall, and the U.S. dollar weakens in response to easing.
5. What does Kalshi represent?
Kalshi is a regulated prediction market where traders bet on economic outcomes often signaling shifts in real-time investor expectations.