Odds of a December Fed rate cut collapse as markets reprice monetary policy

Key Takeaways

What are the current odds of a December rate cut?

Polymarket traders now assign just 32% probability to a 25bps cut in December, down from near-certainty weeks ago, with 67% odds for no change.

What triggered the collapse in rate cut expectations?

The latest Federal Reserve minutes signaled caution regarding inflation and uncertainty in the labor market, prompting traders to reprice December policy bets.

Investor expectations for a December rate cut have collapsed after the latest Federal Reserve minutes signaled caution on inflation and uncertainty in the labor market. 

Real-money prediction markets now price in a sharply reduced chance of policy easing next month, triggering volatility across asset classes—with crypto taking the heaviest blow.

Polymarket odds show the clearest shift so far. Traders now assign a 67% probability that the Fed will keep rates unchanged in December, while the odds of a 25bps cut have plunged to 32%.

Just weeks ago, markets priced in near certainty that a cut was coming. 

Source: Polymarket

Larger cuts sit at 2%, while hike odds register at a negligible 1%.

This repricing has directly influenced market behavior: equities are holding up despite volatility, while crypto continues to unwind sharply as liquidity expectations wane.

Rate expectations flip, and markets react differently

Despite the sharp swing in expectations, the S&P 500 remains structurally firm. The index has given back a portion of its November gains. Yet, the chart shows that buyers still defend higher levels compared with the summer.

The Nasdaq Composite mirrors this pattern with a mild pullback rather than a trend break. Tech stocks continue to attract institutional flows even as macro uncertainty rises.

The picture looks very different on the crypto side. Total market capitalization slid to around $3.01 trillion, reflecting a continuation of the sell-off that began earlier this month. 

The chart shows clear downward continuation, with the market making new local lows as expectations for easier monetary conditions evaporated.

What this means heading into December

With the Fed now signaling caution and markets no longer convinced a cut is coming, the near-term path for risk assets becomes more nuanced. 

Equities may remain stable as long as earnings and labor-market strength continue to support valuations. The S&P 500 and Nasdaq have absorbed the repricing without breaking their broader uptrends.

Crypto may remain under pressure unless liquidity conditions improve or ETF flows recover from recent outflows.

The $700 billion decline in total market cap since early November signals that speculative assets feel monetary tightening first and hardest.

Volatility could intensify as traders reassess the path of policy into early 2026.

The gap between Fed expectations just three weeks ago and current Polymarket odds represents one of the fastest sentiment reversals this year.

The rapid reversal in rate expectations makes December one of the most important macro moments of the year—and for now, crypto sends the clearest signal that the market braces for tighter conditions, not relief.