Bitcoin holds as CME FedWatch tips FOMC cut odds before PCE

Are traders pricing a Fed cut next meeting? Yes, odds above 23%

Market-implied probabilities suggest more than 23% of traders expect a rate cut at the next Federal Open Market Committee meeting. That figure reflects the pricing of fed funds futures and can shift quickly as macro data and policy remarks arrive.

These probabilities are not a survey; they are an aggregation of positions and prices in interest-rate derivatives that translate into odds for discrete FOMC outcomes. The gap between market pricing and policymaker caution can persist until new data narrow the uncertainty.

How the CME FedWatch Tool computes FOMC rate cut odds

The FOMC recently kept the target range for the federal funds rate at 5.25%–5.50%, according to the Federal Reserve. From there, the FedWatch methodology maps fed funds futures prices into an implied average overnight rate for the meeting month, then allocates probability mass across the possible target ranges that could produce that average.

Within a given contract month, the tool infers the likelihood of each discrete outcome (e.g., hold, 25 bps cut) so that the probability-weighted average matches the futures-implied rate. Rounding, contract roll, and intraday moves can cause small, visible shifts in displayed percentages even when the underlying market move is modest.

Near-term impacts on stocks, Treasury yields, USD, and Bitcoin

When cut odds rise, Treasury yields typically ease as the expected policy path shifts lower, a dynamic that can support equity valuations and weigh on the U.S. dollar. If odds retreat, the reverse often occurs, with yields firming, equities consolidating, and the dollar finding support.

Recent price action underscored how cross-asset forces can offset each other: cooling labor data nudged markets toward more cuts, but a rebound in stocks and a delayed jobs report helped yields bounce back, as per Finimize. For crypto, macro sensitivity has grown; an academic study by S. Pyo (2020) found Bitcoin’s average return was about 0.26% in the absence of major announcements, implying that event days like FOMC decisions can drive wider dispersion around that baseline.

Policy communication can also nudge expectations. After emphasizing data dependence, some officials have acknowledged scope to ease if inflation progress persists, “in the near term,” said John Williams, President of the New York Fed, as reported by Investing.com.

Data that could shift odds: CPI, core PCE, jobs

Two upcoming inflation prints can reset the path of implied probabilities: headline CPI and the Fed’s preferred core PCE measure. If either decelerates, odds of a cut may increase; if they reaccelerate, markets may price a longer hold.

Labor data remain critical signposts for demand and wage pressure. A surprisingly strong nonfarm payrolls report can push back cut timing, while softer hiring or a higher unemployment rate tends to pull it forward. Markets are watching this “double feature” of inflation updates because they can rewrite the rate-cut narrative before the meeting, as reported by TradingView News.