Markets are holding their breath ahead of the next Fed meeting with a possible monetary turning point as early as March. As inflation slows and the political context becomes more complex, an unexpected signal is gaining strength. According to CME data, more than 23% of traders are now betting on a rate cut. This shift in sentiment, still a minority but growing, could well reshuffle the cards.
The idea of a rate cut in March seemed premature a few days ago. Yet, data from the CME FedWatch Tool show a notable shift in expectations: 23% of traders now anticipate a 25 basis point cut in the federal funds rate at the March FOMC meeting.
This figure was 18.4 % a week earlier, marking a significant shift in market sentiment. Indeed, no scenario currently foresees a larger 50 basis point cut at this stage.
Here are the main factors driving this momentum :
This reshaping of expectations reflects a cautious reading but oriented towards a rate moderation scenario, which remains conditional on the release of upcoming macroeconomic indicators.
Alongside shifting expectations, the concrete implications of a possible Fed move are already visible in several markets. If the central bank decides to keep rates unchanged, or even delay a rate cut further, the consequences for overall liquidity would be immediate.
Such a stance would potentially involve a reduction of the Fed’s balance sheet, which could put additional pressure on liquidity. In an environment where public debt exceeds 38 trillion dollars, every tightening becomes an amplifying stress factor for markets most sensitive to capital flows.
For cryptos, the prospect of delayed easing could play an ambivalent role. Historically, a rate cut favors allocation towards riskier assets, including bitcoin and major altcoins. Conversely, a more cautious Fed dampens these capital movements.
The current environment thus favors increased volatility, where every macroeconomic news item can trigger rapid portfolio adjustments, both among institutional and retail investors.
