The probability of a Federal Reserve interest rate cut in December has collapsed, transforming a near-certain bet into a long shot. Market expectations, as measured by the CME FedWatch Tool, have plummeted from a 98% chance a month ago to around 30-35% as of November 20, 2025. This rapid shift is reshaping the landscape for traders and institutions as they navigate the weeks leading up to the final Federal Open Market Committee (FOMC) meeting of the year.
A Sudden Shift in the Wind
Just a month ago, a rate cut in December was almost a foregone conclusion. The dramatic reversal in market sentiment stems from a confluence of factors that have introduced significant uncertainty. A key element has been an information blackout caused by the recent government shutdown, which led to the cancellation of the October jobs report and will delay the November report until after the December FOMC meeting. This has deprived the Fed of critical labor market data it would typically rely on to calibrate policy, forcing policymakers to operate in the dark.
At the same time, the Fed itself has revealed a deeply divided committee. The minutes from its October meeting, released on November 20th, showed that policymakers held “strongly differing views” on the appropriate path forward. While some participants saw a case for another cut in December, many others believed it would be appropriate to hold rates steady for the rest of the year. This lack of consensus, coupled with inflation that remains above the Fed’s 2% target, has fueled the market’s retreat from its earlier confident stance.
Navigating a New Market Reality
This reset in expectations is forcing market participants to quickly adapt their strategies. The high likelihood of rates remaining at their current level for the rest of the year means that the environment of easy money is on pause. For traders, this implies a greater risk of sudden volatility as markets repricing to this new reality. Those with leveraged positions, particularly in derivatives and perpetual futures markets, will need to reassess their margin requirements and funding scenarios carefully.
For institutional treasuries and portfolio managers, the “no data, no cut” environment demands a more cautious approach. The absence of clear statistical confirmation on the health of the labor market makes the Fed’s path incredibly difficult to predict. In this climate, prioritizing liquidity and reviewing risk management protocols, such as stop-loss levels in short-term strategies, becomes paramount. All eyes will now be on the Fed’s communications and the eventual release of the delayed employment data for any signals about the future of monetary policy in 2026.
