Summary: A month ago, if you'd asked any trader what the Fed would do in December, you'd get the same answer: cut rates, obviously. Polymarket had it at 95%. Wall Street consensus was locked in. December was a done deal. Today? It's a genuine coin flip. 50% chance they cut, 50% chance they pause.
According to Morningstar, "the market odds of a US December interest rate cut have dropped to 53% from 95% a month ago"—one of the fastest probability reversals in recent Fed history. And more importantly—what does this tell us about trading Fed decisions when even the Fed doesn't know what they're doing?
The Story So Far
The Fed cut rates in September (down to 4.00%-4.25%) and again in October (down to 3.75%-4.00%). Both times, markets saw it coming from a mile away. Classic easing cycle playbook: front-load the cuts, then slow down as you approach "neutral" (around 3% in this cycle).
December was supposed to be cut number three. September's projections said two more cuts by year-end. October delivered one. December delivers the other. Simple math.
Except nothing about this December meeting is simple anymore. As CNBC put it: "Federal Reserve Chair Jerome Powell wasn't kidding a couple weeks ago when he said a December rate cut wasn't in the bag."
Three Things That Broke The Consensus
1. Powell Said The Quiet Part Out Loud
After the October meeting, Fed Chair Powell used five words that reset the entire market: "not a foregone conclusion—far from it."
That's not Fed-speak for "maybe." That's Powell actively telling markets: stop pricing in a December cut like it's guaranteed. When the Fed chair needs to use the phrase "far from it," he's trying to move probabilities, not just hedge.
But the real bombshell came next. According to Powell's official October 29th press conference transcript: "In the committee's discussions at this meeting, there were strongly differing views about how to proceed in December."
"Strongly differing views" is central banker code for "we had a real argument about this."
2. The October Data Just... Doesn't Exist
Here's the weird part: October's economic data is gone.
In Powell's own words from the October press conference: "Although some important federal government data have been delayed due to the shutdown, the public• and private-sector data that have remained available suggest that the outlook for employment and inflation has not changed much since our meeting in September."
Translation: We're flying with incomplete instruments.
The government shutdown from early October through November meant no CPI report, no jobs report, no PCE inflation data. According to multiple reports, this data may never be released—the first time in history we'd permanently lose a month of official economic readings.
So the Fed is walking into their December decision with a full month of missing information. The last clean data they have? September's numbers showing inflation at 3.0%—still 50% above their 2% target.
3. The Committee Can't Agree On Direction
October's vote was 10-2, but here's the crazy part: the two dissents were on opposite sides.
According to the official FOMC statement, Governor Stephen Miran wanted a bigger 50 basis point cut, while Governor Jeffrey Schmid wanted no cut at all. One governor saying "cut more" while another says "don't cut" isn't a minor disagreement—that's a fundamental split on what's happening in the economy.
When your committee is this divided and you're missing a critical month of data, December stops being about following the plan and starts being about genuine uncertainty.
What Polymarket Is Telling Us
Current December odds: • Hold rates: 50% • Cut 25 bps: 47% • Everything else: 3%
Four weeks ago it was 95% cut, 5% hold. That's not a probability adjustment—that's a complete narrative flip.
As NBC News reported: "Stocks tumbled on Thursday as chances of a December rate cut appeared to fade," with the S&P 500 down 1.6% on a single day of repricing. When markets go from near-certainty to a coin flip this fast, it's because new information fundamentally changed the equation.
In this case: Powell's "far from it" comments + missing October data + divided committee = nobody knows anymore.
The Two Scenarios
If They Cut (47% probability)
This would be the "stick to the plan" move. September said two more cuts by year-end, and the Fed delivers. Markets would probably shrug—it's close enough to priced in that there's no real surprise.
The interesting part would be Powell's press conference. Does he signal this is the last one for a while? Does he keep options open for January? The cut itself matters less than what comes after.
If They Pause (50% probability)
This is where things get spicy. A pause would mean: • Stocks could sell off 2-3% immediately • January cut probability jumps to 70% • Everyone reprices what "data dependent" actually means
The Fed pausing here would signal that inflation at 3% vs. their 2% target matters more than labor market softening. It's a bet that they can afford to wait for better data rather than cut into uncertainty.
According to Investopedia's reporting on the internal debate: Fed officials are split between those who want to "cut interest rates to save jobs" and those who want to hold firm on inflation. That's not a consensus—that's a genuine policy fork in the road.
What's Actually Driving This
Strip away the technical details and here's the real issue: the Fed doesn't want to cut rates while inflation is still running 50% above target, but they also don't want to be the reason the labor market cracks.
Usually, they'd look at October's data to make that call. But October's data doesn't exist. So they're choosing between:
A) Cut anyway because that was the plan B) Pause until they have clean November data
Neither is obviously right. Hence: coin flip.
The Bigger Picture
December isn't really about December—it's about what December tells us about 2026.
If the Fed cuts, it suggests the easing cycle has momentum regardless of incoming data. They're on a path back to 3% and nothing short of a major inflation spike changes that.
If the Fed pauses, it suggests the September pivot was more conditional than markets thought. Data-dependent means actually data-dependent, not just "we'll cut every other meeting."
The Trading Angle
Here's where it gets interesting for prediction markets: when you have genuine 50/50 odds, the edge isn't in predicting the outcome—it's in pricing what happens after the outcome.
If the Fed cuts and markets are already at 47% probability, there's no surprise. But if the Fed pauses while half the market is still positioned for a cut? That's where volatility lives.
The other play is January. If December passes without a cut, January immediately becomes 70%+ likely. New voting members rotate onto the committee, November/December data fills the October gap, and the Fed has a cleaner decision environment.
What To Watch
Three things between now and December 9th:
1. November jobs report (due ~Dec 6) • First real data since the shutdown 2. Fed speaker comments • Bostic, Williams, and Waller are all speaking this week; any shift in their language could move probabilities fast 3. How fast the probabilities move • If we're still at 50/50 on December 8th, that's genuine uncertainty. If it shifts to 80/20 either direction, someone knows something.
The Bottom Line
A month ago, December was a formality. Today it's the most uncertain Fed decision in years.
That uncertainty isn't a bug—it's a feature. When Powell uses language like "strongly differing views" and admits the data blackout has complicated their outlook, when markets flip from 95% certainty to an even split, when half the outcome creates surprise no matter what happens... that's when prediction markets actually earn their edge.
The Fed may have started this easing cycle with confidence, but they're ending 2025 with what Morningstar called "a coin toss." And in markets, fair coins are where the real bets live.
--• Research sourced from Federal Reserve press conference transcripts, CNBC, Morningstar, NBC News, Investopedia, and Polymarket data as of November 2025.