Fed Interest Rate Predictions Signal 70% Chance of December 2025 Cut

Markets are currently pricing in a high probability of a Federal Reserve rate cut at the December 9–10, 2025 FOMC meeting, with estimates generally in the 70–85% range for a 25 basis point move, depending on the source and exact day measured.​

What the “70% chance” means

A “70% chance of a December 2025 cut” usually refers to probabilities implied by Fed funds futures and tools like the CME FedWatch, which translate market pricing into odds of specific rate outcomes at a given FOMC meeting. These probabilities move frequently as new inflation, labor-market data, and Fed communications come out, so 70% is a snapshot, not a guarantee.​

Current market expectations

Recent analyses note that traders see a roughly 70–80%+ chance of a 25 bp cut in December, with some sources citing odds around 71–85% for a move that would bring the target range near 3.5–3.75% by year‑end 2025. Prediction markets (such as Kalshi and Polymarket) also show odds above 80% for a quarter‑point cut, with only a small probability assigned to no change or a larger move.​

Why markets expect a cut

The rising odds are tied to signs of a cooling labor market and moderating underlying inflation, which reduce the need for restrictive policy. Dovish remarks from key officials, including New York Fed President John Williams, have reinforced expectations that another “near‑term” adjustment is likely at the final 2025 meeting.​

How forecasts translate to rates

If the Fed delivers the expected 25 bp cut in December, the federal funds target would likely end 2025 in roughly the 3.5–3.75% area, following earlier cuts in September and October that have already taken rates to their lowest since 2022. Some large banks, such as Bank of America, then project one or two additional quarter‑point cuts in 2026, potentially taking the policy rate toward the 3.0–3.25% zone over time.​

A single 25 basis point Fed cut next year would likely exert modest downward pressure on mortgage rates, but it is unlikely on its own to produce a large drop; the broader path of inflation, growth, and long‑term bond yields will matter more.​

How Fed cuts feed into mortgages

Mortgage rates are tied more closely to the 10‑year Treasury yield than directly to the federal funds rate, because 30‑year mortgages are long‑term loans while the Fed’s rate is an overnight benchmark. When the Fed signals an easier stance, it can pull long‑term yields lower, but the move in mortgage rates is usually smaller and less predictable than the change in the policy rate.​

Likely size of the effect

Recent history shows that two 25 bp cuts in 2025 helped pull 30‑year mortgage rates down from around the high‑6% to low‑7% range toward the low‑6% range, but not anywhere near pandemic‑era levels. A further 25 bp cut next year, if accompanied by continued easing in inflation and stable credit markets, could help nudge average 30‑year rates a few tenths of a percentage point lower or keep them near roughly 6% instead of drifting higher.​

What forecasts currently suggest

Major forecasters such as Fannie Mae, NAR, and the Mortgage Bankers Association generally expect 30‑year mortgage rates to hover around the low‑6% area through late 2025 and into 2026, with only gradual slippage below 6% if the Fed continues cutting and inflation stays contained. The Congressional Budget Office and private outlooks for the 10‑year Treasury also point to only a mild decline in long‑term yields over the next couple of years, which caps how far mortgage rates are expected to fall.​

Practical implications for borrowers

For homebuyers and refinancers, the main impact of a 25 bp cut is likely to be slightly better rate quotes or reduced risk of a spike, rather than a dramatic affordability improvement. Because markets often move in anticipation, some of the benefit may show up in mortgage pricing before the Fed actually cuts, so watching 10‑year Treasury yields and locking a rate when drops occur can matter as much as the meeting outcome itself.​