- The CME Fedwatch and Polymarket showed an increasing probability for another interest rate cut in December, propelling Bitcoin prices at the start of the regular work week.
Bitcoin (BTC) bounced sharply from a slump to the $80K line on Friday, reaching $88K by early Monday morning (UTC). The prime cryptocurrency asset recovered as sell pressure on the 14-day Relative Strength Index (RSI) overheated over the weekend, prompting traders to buy the dip.
Another factor analysts think has contributed to the shift toward a slight optimism in the market was the public’s positive outlook for another interest rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on December 9 to 10. Data from the CME Fedwatch and Polymarket have reflected the sudden shift in sentiment.
Probability of an Interest Rate Cut by December
As of Monday morning, the CME Fedwatch projected around a 69.3% chance of a 25-basis-point (bps) interest rate cut, potentially bringing the figures down to 3.5%-3.75% from the prevailing 3.75%-4%. On the other hand, the odds of the Fed not touching the numbers were only 30.7%. The Fedwatch platform analyzes the price of 30-day Fed Funds futures contracts for its forecasting.
The numbers were higher than last Thursday’s readings, following Morgan Stanley’s bleak assessment. The multinational investment bank stated on Thursday that it wasn’t expecting another interest rate cut in December, citing resilient jobs data.
Meanwhile, Polymarket’s figures aligned with the CME’s evaluation. The decentralized prediction market projected a 67% chance for a 25 bps cut, with only 2% favoring a 50 bps slash and 32% saying the US central bank will maintain the status quo.
Fed Bank of Boston President Against Cutting Rates
Federal Reserve Bank of Boston President Susan Collins, however, has told CNBC in an interview that she’s hesitant about lowering short-term borrowing. She believes the 50 bps overall easing in September and October was already in the “mildly restrictive range.” Hence, she opined that the current situation, highlighted by above-target inflation and a softening jobs market, no longer warrants a rate adjustment.
“I see risks on both sides, and it’s really about balancing those risks,” said Collins.
Collins’ comments supported Fed Chair Jerome Powell’s cautious remarks, warning against a rate cut next month. The head of the US central bank notably voted in favor of an interest rate cut by 25 bps in the FOMC’s October meeting.
The two officials’ recent statement was contrary to Fed Governor Christopher Waller’s view, which was inclined to a rate cut. According to him, US inflation is showing signs of a slowdown. He explained that their forecast indicates “inflation coming back down to target.”
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