Expectations for an interest-rate cut by the U.S. Federal Reserve in December stayed muted even after delayed employment figures for September were finally released.
According to market pricing tracked through the CME FedWatch Tool, traders now assign roughly a 35% probability that the central bank will reduce rates by a quarter point at its next meeting. That reflects a slight uptick from the previous session’s 30%, but still signals that investors largely believe the Fed will hold steady. The current federal funds rate stands between 3.75% and 4.00%.
Mixed Signals From September Jobs Report
The newly published September nonfarm payrolls report — the first since the government shutdown — offered a divided view of the U.S. labor market. Employers added 119,000 jobs, far surpassing expectations of about 50,000. However, the unemployment rate rose to 4.4%, the highest recorded since late 2021.
Former Federal Reserve Vice Chairman Roger Ferguson noted on CNBC that the data suggests the economy remains stable, with neither strong momentum nor major deterioration. He highlighted that while unemployment ticked up, other indicators such as labor-force participation and hourly earnings still show resilience. In his view, the report does little to sway the Fed decisively toward or away from a rate cut.
Could Higher Unemployment Push the Fed Toward Easing?
Some investors believe the softer unemployment reading could still keep a December rate cut in play. Policymakers pay close attention to joblessness, and concerns about a shrinking labor pool — exacerbated by tighter immigration measures — could amplify worries about job-market cooling.
Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, wrote that persistent softness in labor-market indicators could influence the central bank to ease policy. With inflation trending near the Fed’s preferred level and broader economic data showing limited strength, Haigh said the environment still allows for a potential cut.
She added that Chair Jerome Powell may continue favoring a cautious, risk-balanced approach to managing labor-market pressures as his current term moves toward its end in May.
