Traders are putting heavy weight on another Federal Reserve rate increase next month, with futures pricing on Friday implying an 88% chance of a quarter-point move at the December 9 decision, according to CME Group rate futures. That is up sharply from 77.5% a week earlier, and it comes as attention shifts to whether the central bank will tighten again at its first meeting of 2027.
The Fed left its target range at 3.75%-4.00% at its October gathering. A 25 basis point increase in December would lift the band to 4.00%-4.25%. While the futures curve still assigns a small probability to a larger half-point step, the dominant bet is on a more measured quarter-point adjustment.
The January 27 meeting is drawing nearly as much scrutiny as December. Futures distribution implies a 68.8% chance that the policy range sits at 4.25%-4.50% after that gathering, a 26.6% chance it remains at 4.00%-4.25%, and a 4.6% chance of 4.50%-4.75%. Reaching the most likely January outcome would require a second consecutive quarter-point increase, meaning the market is effectively pricing back-to-back moves.
Note: Probabilities derived from CME rate futures pricing; the October meeting left the target range at 3.75%-4.00%.
The repricing is not confined to the futures market. Bank of America added a quarter-point increase to its January forecast, with a research note summarized on X indicating the bank now expects hikes at the December, January and March meetings. That view points to a more restrictive policy path extending into the spring.
Fed Chairman Kevin Warsh will hold a press conference after the December decision, and investors are expected to parse his remarks for signals on the pace of tightening beyond the first quarter. The official calendar places the final meeting of 2026 on December 8-9.
For markets, the shift matters well beyond Treasuries. Higher expected policy rates tend to lift the dollar and weigh on risk assets, a channel that has kept cryptocurrencies such as Bitcoin sensitive to each update in the implied path. Futures-implied odds are not commitments, however, and the Fed can adjust course based on the economic assessments it publishes alongside each decision, leaving room for the pricing to move again before December 9.
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