Fed December Rate Cut Speculation & Market Implications

Fed Daly’s (San Francisco Fed) surprise support for a December 2025 rate cut, alongside New York Fed’s John Williams, has shifted market expectations dramatically. The CME FedWatch Tool now shows an 81% probability of a 25bp cut (up from ~42% a week ago) [1][2]. Weak labor markets were cited as the primary driver for the dovish stance [1][2]. Market reactions include firmer stock closes in November, soaring gold prices, and Bitcoin hitting $87k amid rate cut speculation [2][3]. The Reddit post’s argument that rate cuts would boost AI investments aligns with the logic of lower capital costs for tech, though no direct verification exists [0].

1. Rapid Expectation Shift
   : The 81% rate cut probability marks a sharp reversal from just a week prior (~42%), driven by key Fed officials’ comments [1][2].
2. Multi-Asset Impact
   : Rate cut speculation has positively affected equities, crypto, and gold—indicating broad investor optimism for lower borrowing costs [2][3].
3. AI Investment Link
   : While unconfirmed, the Reddit’s claim of AI investment boosts from rate cuts highlights the sensitivity of tech sectors to monetary policy [0].

• Risks
  : Concerns about propping up an AI bubble (per Reddit discussion), fragile labor markets signaling economic weakness, and potential short-term volatility from the CME outage [1].
• Opportunities
  : Panic sell-offs (as suggested by Reddit) could present buying opportunities; lower rates may stimulate consumer spending and business investment [2].

Fed officials Daly and Williams support a December rate cut (81% probability) due to weak labor markets. The Fed meets Dec 9-10 [1][2]. Market reactions include stronger stocks, gold gains, and crypto rallies. The AI investment argument from Reddit remains unverified but aligns with general tech sector sensitivity to interest rates. Pending data releases (retail sales, wholesale prices) may not alter the Fed’s decision significantly [1].