Strong Employment and Persistent Inflation Dampen Fed's Expectations for Rate Reductions
- The Fed's December rate cut probability dropped to 48%, reflecting skepticism over easing amid sticky inflation and strong labor markets. - Dallas Fed's Lorie Logan and Minneapolis Fed's Neel Kashkari oppose cuts, citing insufficient progress toward 2% inflation and gradual labor market cooling. - Persistent low unemployment and inflation above targets have shifted policymaker sentiment, with officials like Susan Collins and Austan Goolsbee cautioning against premature easing. - Market expectations contr
For the first time in several months, the likelihood of the Federal Reserve lowering interest rates in December has dipped below 50%, signaling a change in both economic indicators and the outlook of policymakers. According to the CME FedWatch tool, market expectations now indicate
Lorie Logan, President of the Dallas Federal Reserve and a non-voting member this year,
Expectations for a December rate cut have faded, in contrast to the widely anticipated move in October.
Recent economic trends have also made a December cut less likely. The U.S. job market remains strong, with unemployment near its lowest levels in decades, and although inflation has moderated, it is still above the Fed’s 2% target. These factors have strengthened the case for either holding rates steady or even raising them, rather than cutting. The Fed’s upcoming meeting on December 17-18 will be closely monitored for any indications about policy direction into 2026.
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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