Fed Faces Rate Cut Uncertainty: Balancing Dovish Momentum and Prudent Restraint Amid Data Delays

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Fed Faces Rate Cut Uncertainty: Balancing Dovish Momentum and Prudent Restraint Amid Data Delays

Bitget-RWA2025/11/20 23:16

By:Bitget-RWA

- Fed Governor Waller advocates 25-basis-point rate cut in December, citing weak labor market and low inflation. - Market expectations for a cut dropped to 42.9% as of Nov 17, reflecting growing skepticism amid delayed key data. - Dovish Waller faces internal Fed caution over inflation risks (3% annual rate) despite his emphasis on labor market deterioration. - White House adviser Hassett highlights AI's potential to reduce hiring needs, complicating Fed's balancing act between weak employment and economic

Federal Reserve Governor Christopher Waller reaffirmed his backing for a 25-basis-point reduction in interest rates at the central bank’s December gathering, pointing to a softening job market and muted inflation. Speaking in London, Waller—considered a leading candidate for the next Fed chair—stated that employment growth is “almost at a standstill” and that tight monetary policy is having a greater negative effect on lower- and middle-income groups

according to analysis

. While his view reflects widespread worries about the consequences of elevated rates, it differs from the more cautious tone recently adopted by some other Fed policymakers regarding further rate reductions.

The Fed’s upcoming decision will rely on a mix of delayed economic data, such as the September jobs report, which is now set for release on Thursday after a 43-day government shutdown caused a postponement. Waller pointed out that

alternative data sources

support his belief that the employment situation is worsening. Nevertheless,

markets have priced in a 42.9% chance

of a rate cut in December as of November 17—a significant drop from 93.7% in October—showing increased doubt about the necessity for more easing. Experts observe that recent remarks from Fed officials with a more hawkish stance have dampened expectations, with Deutsche Bank calling the outcome “far from assured”

according to market analysis

Fed Faces Rate Cut Uncertainty: Balancing Dovish Momentum and Prudent Restraint Amid Data Delays image 0

White House economic adviser Kevin Hassett offered a more nuanced perspective, noting “mixed signals” in employment but emphasizing “very encouraging signs in output markets.” He suggested that progress in artificial intelligence might decrease companies’ need to hire, potentially extending the period of weak labor demand

according to his comments

. This viewpoint highlights the Fed’s difficulty in weighing disappointing job numbers against broader economic strength.

The lack of crucial economic data adds to the uncertainty. The postponed September employment figures and other delayed reports will be key factors in the Fed’s final call at its December 9–10 meeting. Waller, however, remains steadfast,

stating that "months of weakening" in the labor market

make it “unlikely” that new information will change his outlook. His remarks illustrate a split within the Fed, with dovish members like Waller advocating for more cuts to boost growth, while others are still concerned about inflation, which

currently stand at 3% annually

Wider financial markets also mirror this uncertainty. The New Zealand Dollar (NZD) strengthened after U.S. President Donald Trump lifted tariffs on $1.25 billion worth of New Zealand goods, but expectations of a rate cut from the Reserve Bank of New Zealand this month capped its gains

according to economic analysis

. At the same time, the CME FedWatch tool indicated a 46% likelihood of a December rate cut as of November 17, down from 67% the previous week, as traders adjusted their positions in response to

shifting official rhetoric

As the Federal Reserve navigates these complicated circumstances, the next few weeks will challenge its ability to interpret conflicting signals. With Waller’s dovish approach and Hassett’s guarded optimism, the outlook remains unclear, but it is evident that the fragile labor market and delayed data will be central to the Fed’s upcoming discussions.

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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