The face of the Federal Reserve Rate Cut Decision between inflation, labor market concerns

The Federal Reserve HOLCOMMKERS are expected to decide on interest rates at this week’s meeting despite inflation remaining above their target on concerns about a softening labor market.

The Federal Open Market Committee (FOMC), the Federal Reserve’s monetary policy committee, will announce its interest rate decision on Wednesday. Markets are widely expecting an average interest rate of 25 basis points, which would mark the third straight meeting of the benchmark rate – although expectations have changed over time.

The minutes from the last meeting of the FOMC showed a deep division among policymakers that the cut would be appropriate to gradually bring the money rates below neutral, showing concerns about the impact this period could have on rising rates.

Market expectations for a rate cut at this week’s meeting have shifted amid worries and disruptions in the release of economic data. Fedwatch’s CME tool showed a 30% chance of a cut on November 19, down from 98% last month, as uncertainty. Those odds have been restored to 87% since Dec. 5 between soft labor market data.

The Fed’s Favorite Inflation Gauge shows consumer prices remained elevated in September

A report from Global Overplacement Firm Challenger, Gray & Christmas found that alloffs announced in 2025 in the month of November were 1,170,821 cuts – the highest cut for the same period since 2020, when there were 2,227,725 cuts The covid-19 pandemic.

ADP Activities Report He pointed to the private sector losing an unexpected 32,000 jobs in November, with 120,000 job losses among small businesses handing out modest profits at large firms.

Weak labor market data comes in the form of the Fed’s Inflation Gauge, The Personal consumption expenditure (PCE) The index remained elevated at 2.8% for Headline PCE and 2.9% for CCE PCE in September, the most recent data release for the metric due to the government shutdown over data collection.

US LayOffs to rise by 1.1M in 2025, highest rate since pandemic

Gregory DACO, chief economist at EY-Parthenon, said that policymakers face three conditions entering this meeting: The persistence of interest rates, and how weak the neutral monetary policy is.

Daco said that Lower tax rates “It remains a thorny issue in the new economic paradigm defined by breaking down shocks from trade policy and tariff rates into demographic change, emerging technological change in AI.”

He indicated that Ightation’s strong core projects will increase by about 3.2% in early 2026 before decreasing by about 2.3% the following year. Daco added that assessing the labor market is difficult, given Low occupancy And the number of elderly people, although they show signs of weakness.

“Many indicators now point to a soft labor market after two years of declines marked by unemployment, the hiring rate at its lowest level in a decade, proposed layoffs, and job cuts among small businesses“Writing:” Daco wrote.

The Fed Chairman explains the vote against the interest rate

Michael Feroli, a former US economist at JPMorgan, said in a note heading into the policy meeting that there are “reasonably compelling reasons to cut and hold” and that the final decision will come down to vote-counting.

“Many governors seem to want to cut, and most of the bank’s lawyers seem to like to hold. The most decisive news for the President of Williams two weeks ago is that there is a place to cut ‘imminent,'” Feroli wrote.

He added that there was likely to be a “hawkish” tone to the announcement, hinting that the Fed could cut short the cut of the measure At the January policy meeting.

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Feroli noted that the firm expects at least two dissents without cutting the rate and preparing for a larger rate cut.