Fed's Battle Between Inflation and Jobs Drops Chances of December Rate Cut to 33%

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Fed's Battle Between Inflation and Jobs Drops Chances of December Rate Cut to 33%

Bitget-RWA2025/11/23 01:08

By:Bitget-RWA

- Fed's December rate cut odds dropped to 33% due to internal divisions and delayed labor market data. - October/November jobs reports delayed until post-Dec 9-10 meeting, removing key policy input. - 10-2 October voting split and cautious officials like Collins highlight policy uncertainty. - Bitcoin fell 20% while gold dipped below $4,000 as markets react to reduced cut expectations. - Analysts warn prolonged indecision risks volatility, with December outcome hinging on incoming data.

The likelihood of the Federal Reserve lowering rates in December has sharply declined to 33%,

based on figures from the Chicago Mercantile Exchange

, as disagreements within the Fed and postponed economic reports add uncertainty to the direction of monetary policy. Not long ago, traders were nearly certain of a 25-basis-point cut, but changing messages from the central bank and missing labor data have forced a reassessment of expectations.

The U.S. Bureau of Labor Statistics’ move to delay the October and November employment reports until after the Fed’s December gathering has deprived policymakers of crucial information. The October jobs data was canceled due to a government shutdown, and the November figures won’t be released until December 16, after the FOMC’s meeting on December 9-10. Without these updates, officials lack timely insights into the labor market, a vital component of their mandate to manage both inflation and employment.

Debate within the Fed has added to the uncertainty.

Minutes from the October meeting, published on November 19

, showed “significant disagreements” among members, with many believing a December rate cut was not justified. The 10-2 split in the October vote highlighted these divisions, and recent remarks from Boston Fed President Susan Collins reflect ongoing caution.

Collins mentioned she is “inclined to oppose a rate cut”

in December, stressing that inflation is still above the 2% goal and that the softening labor market is still under review.

Fed's Battle Between Inflation and Jobs Drops Chances of December Rate Cut to 33% image 0

Market movements have reflected the Fed’s indecision.

The CME FedWatch Tool

, which monitors futures trading, indicated the probability of a December cut fell to 35% after the October minutes came out, but rebounded to 71% following dovish comments from New York Fed President John Williams. At the same time, cryptocurrency markets have experienced heightened swings,

with Bitcoin dropping below $89,000

—a decline of nearly 20% from its late October high—as investors adjust to the reduced likelihood of rate cuts.

Gold, often considered a safe haven during market stress, has also come under pressure.

XAU/USD slipped to its lowest level in several days

as expectations for a Fed cut faded, with prices hovering near the $4,000 psychological threshold. In contrast, the U.S. dollar has strengthened, with the DXY index climbing to a five-month peak as investors seek returns and security in a prolonged high-rate environment.

Experts caution that the Fed’s ongoing indecision could extend market turbulence. “The Fed’s challenge in juggling inflation and employment is creating a climate of uncertainty,” one strategist observed, noting that the central bank’s dual objectives are increasingly in conflict.

Stubborn inflation, now at 2.8%

for core PCE, continues to be a major barrier to rate reductions, while indications of a slowing job market—including a 4.4% unemployment rate in October—have intensified calls for easing.

Looking forward, the outcome of the December meeting will depend on new data and further signals from the Fed. Should officials decide to keep rates unchanged, the “higher-for-longer” scenario may persist, raising borrowing costs for both households and companies. On the other hand, a 25-basis-point cut would mark a cautious shift toward a more supportive policy, potentially lifting stocks and easing strain on the housing market.

As the Fed faces these pivotal decisions, markets are adopting a wait-and-see approach, closely watching the December meeting and the return of key economic indicators.

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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