Global financial market optimism has increased after the latest data indicated a strong chance that the Federal Reserve (The Fed) will cut interest rates in December 2025. According to the CME FedWatch Tool, the probability of a 25 basis point (bps) interest rate cut is now around 67 to 70 percent.

This move is seen as a response to slowing US economic growth and pressure from fiscal uncertainty triggered by the government shutdown that lasted more than a month. Analysts believe that a moderate cut will help maintain economic momentum toward the end of the year without reigniting inflationary pressures.

"The market is already positioning itself for one cut in December," said a Wall Street macro analyst. "The Fed wants to strike a balance between keeping inflation under control and preventing a sharper economic slowdown.

In addition to the 25 bps cut scenario, a small number of market participants predict a larger cut, up to 50 bps, with a probability of around 20–25 percent. However, most analysts consider this scenario too aggressive, given that US core inflation remains persistently above the 2 percent target.

Fed Chairman Jerome Powell previously emphasized that a December rate cut was not a foregone conclusion and would depend heavily on inflation data and the employment report released ahead of the FOMC meeting.

Expectations for monetary easing have also impacted commodity markets. Gold prices have been stable at around $4,115 per ounce, as investors weigh the potential for a weakening US dollar if interest rates are actually cut.

With the probability of a rate cut approaching 70 percent, market participants are now preparing for a period of looser monetary policy in early 2026, although some economists warn that moving too quickly could reopen inflation risks in the second half of next year.

Source: Newsmaker.id