The Federal Reserve is set to meet on December 9 and 10 amid a backdrop where expectations of a rate cut are playing a central role in the recent volatility of cryptocurrencies and other markets. A divergence between market expectations and the Fed’s new projections could reignite selling pressure.
A Closely Watched Meeting
On December 9 and 10, members of the Federal Reserve Committee will meet for the last time this year to update monetary policy—a crucial decision for risky assets, including cryptocurrencies, given recent volatility. A significant portion of the turbulence observed in recent weeks can be attributed to shifting expectations regarding rate cuts, as well as the recent pressure on risky assets caused by their downward revision.
Source: TradingView / Daily chart of the S&P 500 and Bitcoin
Markets likely to pause while awaiting the Fed
The implied probability of another 25-basis-point cut in December fell from over 90% at the end of October to around 30% on November 20, following more resilient-than-expected inflation data and a wait-and-see stance from Jerome Powell at the previous meeting. However, this scenario has regained credibility in recent days thanks to dovish comments from several influential members of the central bank, notably John Williams and Christopher Waller.
The probability has thus risen to around 80%, triggering a strong rebound in risky assets. The S&P 500 erased its losses to end November with a very slight gain, while the price of Bitcoin (BTC) reduced its decline to about 15% thanks to a rebound of more than 10%.
It is now unlikely that this 80% probability will change significantly between now and the meeting, given the absence of major macroeconomic data and speeches by Fed members on the calendar. In terms of the risk/return profile, these expectations now appear relatively high given the arguments put forward by Jerome Powell in October in favor of keeping rates steady—arguments that remain fully valid.
Since the last meeting, inflation has come in higher than expected and remains about 1 percentage point above the Fed’s target, while the latest employment figures show no notable deterioration. The rise in unemployment has been driven primarily by new entrants to the labor market.
The Fed’s projections for 2026 will also be crucial
Beyond the rate decision, the new economic projections released at this quarterly meeting will be just as important. Each member of the Committee presents their projections for growth, inflation, and interest rates over the next three years. The comparison with the September projections will be decisive for the markets, particularly regarding 2026. In September, the Committee anticipated only one additional 25-basis-point cut in 2026, whereas markets currently expect at least two. If the Committee sticks to its September projections, selling pressure could quickly return to risky assets.
The key figure to watch will be the ‘median’ projection for the Federal Funds rate in 2026
In my view, the risks are skewed more to the downside in the short term. For the Fed to provide genuine support for risky assets on December 10, it would need to exceed current expectations—in other words, cut rates by 25 basis points and project at least two additional cuts next year. However, the most likely scenario seems to me to be a “hawkish rate cut” in December—that is, a cut accompanied by a firm tone and projections largely unchanged from those in September. The new projections will be available on this page.
