Deutsche Bank predicts the Fed will cut interest rates in December as Polymarket odds soar to 84%

Deutsche Bank now shares the market’s view that the Fed will cut interest rates in December, forecasting a 25 basis point reduction and then maintaining that policy for an extended period. The bank’s analysts expect the Fed to keep this rate throughout 2025 and only continue easing in Q3 2026 with a mild 25 basis point cut. This scenario reflects the view that inflation will gradually cool without causing a severe recession, allowing the Fed to adjust slowly rather than entering a rapid rate-cutting cycle.

At the same time, the prediction platform Polymarket recorded a sharp increase in expectations for a December rate cut. The probability of a 25 basis point cut has risen to 84%, while the likelihood of holding steady has dropped to 16%. The odds of a larger cut are nearly zero. This development suggests the market is leaning toward a single rate cut in December before the Fed pauses to assess the economy.