📝 December FOMC Rate-Cut Expectations: “Dipped, Then Rebounded Slightly”
Because the September U.S. jobs report was delayed due to the government shutdown, its release showed a mixed picture:
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Nonfarm payrolls: +119k (vs. +51k expected) → strong
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Unemployment rate: 4.4% (vs. 4.3% expected) → unexpected rise
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Previous two months: revised down a total of -33k
The rise in unemployment pushed market expectations slightly toward a December rate cut:
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Before the release: 75% probability of no cut
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After the release: 65% probability of no cut
→ meaning rate-cut expectations ticked higher
🏛 FOMC Outlook: A Rate Cut Is Still “Not a Done Deal”
Key background:
Updated BLS jobs data will not be released until December 16, after the December FOMC meeting.
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No fresh labor data → Powell is likely to stay cautious
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FOMC members remain split, with a slightly hawkish tilt:
More hawkish (against cutting):
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Boston Fed’s Collins
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Kansas City Fed’s Schmid (voted against easing last time)
More dovish (open to cutting):
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Governor Waller
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Governor Milani
Most members remain undecided, but:
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The October minutes noted that “many” participants see holding rates steady through year-end as appropriate.
🎯 Bottom Line: Rate-Cut Odds Are Higher, but Still Uncertain
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Rising unemployment → supports December cut expectations
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But lack of fresh data + hawkish Fedspeak → limits conviction
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As of now, the outlook is:
👉 Rate-cut probability has increased, but it’s far from decisive.
📝 Market Impact Summary: Jobs Data Triggered U.S. Dollar Selling
The jobs report delivered a twisted outcome—strong payrolls but a clear deterioration in unemployment, with the jobless rate rising to 4.4%.
This spike raised concerns about economic momentum.
As a result:
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December rate-cut expectations firmed slightly
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U.S. yields edged lower
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USD selling became the dominant market reaction
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Before the release: 75% probability of no cut
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After the release: 65% (→ higher chance of a cut)
Additionally, because new employment data will not be available before the December FOMC, markets believe:
“The Fed won’t aggressively cut, but it also cannot justify turning more hawkish without data.”
This combination led traders to respond with:
👉 “Weaker data + firmer rate-cut expectations” → USD selling bias
