Has Powell revealed his hand? Big bets on the Fed cutting rates in December

Traders are making big bets that Federal Reserve decision-makers will cut rates again at next month's meeting. This move not only eliminates the doubts about not cutting rates that were prevalent last week but also paves the way for a rise in U.S. Treasury prices.

Current market pricing shows that the probability of a 25 basis point rate cut at the Fed's December meeting has risen to about 80%, while just days ago, this number was only 30%.

The turning point in interest rate expectations began with the delayed release of the September employment data last week—this mixed report caused the market to shift direction. As New York Fed President Williams hinted last Friday that there is “recent room for a rate cut” against the backdrop of a weak labor market, bullish sentiment further intensified.

Despite facing opposition from other officials more concerned about inflation, Fed Chair Powell and his allies on the policy-making committee have “reached a consensus on cutting rates.” With recent economic data, including labor market indicators, showing weakness, “Powell will be able to persuade other committee members.”