Data Shortfalls and Policy Conflicts Prevent Fed from Lowering Rates in December

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Data Shortfalls and Policy Conflicts Prevent Fed from Lowering Rates in December

Bitget-RWA2025/11/21 14:36

By:Bitget-RWA

- The Fed’s December rate cut prospects have dimmed, with officials citing data gaps and inflation concerns, reducing the CME FedWatch probability to 32%. - Delayed BLS labor market reports left policymakers without critical metrics, fueling skepticism about justifying a cut amid internal divisions. - Officials like Christopher Waller argue for easing due to a "stall speed" labor market, while Lorie Logan and Beth Hammack caution against premature cuts risking inflation and market instability. - Markets ha

Expectations for the Federal Reserve to lower rates in December have faded sharply, as officials such as Lael Brainard indicate that additional monetary easing is unlikely due to missing key labor data and ongoing disagreements about inflation. By November 20, the likelihood of a 25-basis-point cut at the December 10 FOMC meeting

had dropped to 32%

, a steep decline from the near certainty seen in October, based on the CME FedWatch tool. The Bureau of Labor Statistics (BLS) postponed the release of October’s jobs report and September’s JOLTS figures,

depriving policymakers of essential data

needed to evaluate the state of the labor market. This lack of information has increased doubts about the Fed’s justification for a rate cut, with markets now largely expecting rates to remain unchanged in the near term.

Data Shortfalls and Policy Conflicts Prevent Fed from Lowering Rates in December image 0

The minutes from the October FOMC meeting, made public on November 19, highlighted the central bank’s internal disagreements. Some members supported a rate cut to offset rising unemployment and slower economic growth,

while others cautioned that inflation is still

above the 2% goal, warning that lowering rates prematurely could lock in higher prices. Federal Reserve Governor Christopher Waller,

a prominent supporter of easing

, pointed to slowing job growth, fewer job openings, and increased layoffs as reasons to consider a December cut. “Easing monetary policy is crucial for managing risks,” he said, stressing that the job market is “close to stagnation.”

Yet, opposition has become more pronounced. Dallas Fed President Lorie Logan, who does not vote this year,

urged caution

, arguing that the two recent rate reductions may not be sufficient to keep policy restrictive. “It’s premature to judge the full effects of our measures,” she remarked, warning against “unwarranted reversals” that could unsettle financial markets. Likewise,

Cleveland Fed President Beth Hammack pointed out

that cutting rates could extend inflationary pressures and promote excessive risk-taking in the stock market.

Shifts in the market are already evident. Bond yields have climbed as traders adjust their outlooks, and industries that depend on low interest rates—like technology and real estate—are experiencing increased volatility

as noted by market analysts

. The U.S. dollar has gained strength, reflecting comparatively higher yields. Investors are now turning to other signals, such as November’s employment figures and upcoming CPI numbers, to gauge the Fed’s direction for 2026.

Although a December rate cut now seems unlikely,

the Fed’s broader outlook still leans toward eventual easing

. For the time being, policymakers are expected to remain cautious, with Vice Chair Lael Brainard observing that “traders appear to have accepted that a December rate cut is off the table.” The months ahead will challenge the Fed to strike a balance between curbing inflation and supporting employment—a balancing act that could become even more difficult as political pressures, including President Donald Trump’s calls for aggressive rate cuts, intensify.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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