Expectations for a December interest rate cut by the Federal Reserve have receded sharply following the U.S. Labor Department’s announcement to withhold the October employment report. The unlikely prospect of a move now stands at 68%, up significantly from the previous month, according to CME FedWatch Tool data.
The probability of a 25-basis-point reduction in rates has plummeted to 32.8%, compared to an overwhelming 93% likelihood forecast just a month earlier. As it stands, 67.2% of market participants now anticipate the central bank will maintain its current policy at its upcoming December meeting.
The Labor Department, in a statement on Wednesday, attributed the report’s cancellation to the inability to calculate critical figures, including the unemployment rate, following a 43-day federal government shutdown.
The Federal Reserve’s decision to lower rates in September was characterized by internal division, as detailed in minutes from the October 28-29 FOMC meeting released on Wednesday. Policymakers cautioned that further easing could entrench elevated inflation or signal wavering determination in pursuing the Fed’s 2% inflation mandate.
The published minutes underscored an emergent rift within the central bank on whether weaknesses in the labor market should outweigh prolonged inflation exceeding the bank’s target, which has shown little progress and is set to moderate only gradually into 2026.
Further, the committee minutes revealed broad consensus to conclude the reduction of the Fed’s balance sheet sooner than anticipated. “Almost all” officials backed the plan to halt the runoff effective Dec. 1, the minutes confirmed.
As a result, market uncertainty over policy direction is set to continue, with traders now viewing another rate reduction at the December 9-10 meeting as a remote possibility—assigned roughly a 25% chance, according to persons familiar with the matter.
