Fed Officials Throw Cold Water on December Rate Cut Hopes as Market Odds Crumble
Wall Street's rate-cut dreams face a reality check.
Fed policymakers just dumped a bucket of ice water on traders betting on a December easing—signaling the inflation fight isn't over. Market-implied odds tanked instantly.
The hawkish whispers:
- 'Premature' chatter about cuts
- Labor market still running hot
- Services inflation sticky as old gum
Translation: The Fed would rather overcook this economy than risk another inflationary spiral. (But hey—at least someone's finally turning down the free-money faucet.)
Bottom line: The market's hopium supply just got cut off. Again.
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“For those keeping score at home, that’s now four Fed presidents with a vote (Collins, Musalem and Goolsbee, plus Schmid who dissented against an October cut) who are not actively agitating for a December rate cut (to put it mildly),” said Wall Street Journal chief economics correspondent Nick Timiraos in an X post.
December Rate Cut Odds Fall to 53.6%
The inflation and labor market data blackout from the Labor Department as a result of the government shutdown has also led to uncertainty within the central bank. The latest data showed September’s Consumer Price Index (CPI) inflation rate and unemployment rate at 3% and 4.3%, respectively.
The odds of a 25 bps rate cut in December, which would bring the rate to between 3.50% and 3.75%, sit at 53.6%, down from 62.9% yesterday, 69.6% a week ago, and 95.5% a month ago, according to CME’s FedWatch tool.
