The Fed is expected to cut a third rate today—here’s what to expect

Key receivers

The Fed is expected to cut interest rates by 25 basis points to 4.25% from 4.5%. As the event looms, market volatility can increase.

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The Federal Reserve is scheduled to announce its interest rate decision at its meeting on Wednesday. Economists widely predict that the Fed will cut rates for the third time in a row, bringing the federal funds rate to the 4.25% target range.

Another 25-basis-point rate cut would cut the total by a full percentage point starting in September. The Federal Reserve first cut interest rates by 0.5 percentage points in September and another 0.25 percentage point cut in November.

According to the CME FedWatch Tool, there is now a 95.4% chance of a 25-basis-point rate cut, compared to a 4.6% chance of keeping current rates. This reflects a modest correction from yesterday, when the probability of a slowdown was around 98%.

However, compared to last week, deflation expectations strengthened, especially after November inflation data met expectations and jobs numbers showed strength.

According to the Bureau of Labor Statistics (BLS), the U.S. economy added 227,000 jobs in November, beating expectations and rebounding from months disrupted by hurricanes and strikes.

Job growth was particularly strong in sectors such as healthcare and tourism. Stronger job gains contribute to a positive economic outlook, which could influence the Fed's decision-making regarding interest rates.

Last week, the BLS reported that November's CPI rose 2.7% year-over-year, in line with expectations. After the report, the odds of a rate cut in December rose to nearly 96 percent.

Future price cuts are unlikely.

Inflation rates have stabilized, but they still could not return to the desired level. The Fed is working to bring inflation down from 9.1 percent in June 2022, and despite progress, the current rate is still above the 2 percent target.

In a statement to CBS News, Jacob Channell, senior economist at LendingTree, said the Fed will likely maintain a 25-basis-point rate cut at the next meeting, but no further cuts are likely in the near future.

Potential changes in economic policies by President-elect Donald Trump, the economist said, “could rekindle inflation or otherwise debalance the economy.” In this case, the Fed may choose to hold off on further rate cuts to assess their impact on the economy.

Crypto markets support volatility ahead of Fed rate decision

Crypto markets are bracing for volatility as the Federal Reserve's interest rate decision nears. Bitcoin (BTC) fell by 2% in the last 24 hours, Ethereum (ETH) fell by 4%, according to data from CoinGecko.

The total capitalization of the crypto market is currently at 3.8 trillion dollars, which shows a decrease of 4% in the previous day.

After reaching $107,000 on Tuesday, Bitcoin fell to $104,000. The rebound triggered a broader decline in altcoins, with Ripple (XRP), Solana (SOL), Doge (DOGE) and Binance Coin (BNB) also experiencing moderate losses.

As the main event looms, the markets are likely to become more volatile.

Among the top 100 crypto assets, Pudgy Penguin's PENGU token posted the biggest loss of 55%, possibly due to heavy selling pressure going down to NFT holders, which led to a significant drop in both the token's value and Pudgy Penguin's floor price. NFTs

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