Will the Federal Reserve Cut rates by 25bps at their December 2026 meeting

The yield curve exhibits a pronounced steepening pattern across the near-to-intermediate term, with the shortest tenor (90 days) showing the cheapest YES probability at 56.0% for H25 (the hold scenario), while the intermediate tenors (139–229 days) display elevated probabilities in the 57–69% range for H0 (no change). The curve then flattens and slightly inverts in the longer-dated contracts, with H0 probabilities declining to 53–58% at tenors beyond 300 days. The most liquid markets cluster at the 90-day tenor, where 24-hour volumes exceed $4,800, suggesting concentrated positioning around the December 26 FOMC decision. Cut probabilities (C25, C26) remain consistently low across all tenors at 1–11%, indicating minimal market conviction in rate reductions. The shape reveals a market expecting the most consequential Fed decision in the near term, with the December meeting carrying the lowest hold probability and the January meeting representing peak uncertainty about policy continuation. The subsequent flattening and slight inversion at longer tenors suggests the market anticipates either resolution of policy uncertainty by mid-year or a reversion to baseline expectations as the event horizon extends. The persistent elevation of hold probabilities across all tenors—never falling below 34%—indicates broad consensus that the Fed will maintain rates, but the term structure's dynamics imply traders view the next 90–229 days as the critical window for potential policy shifts, with conviction weakening substantially beyond mid-2025.