The Fed's December Rate Cut Expectation Significantly Cooled Down, With No Key Data Available Before the Officials' Meeting
BlockBeats News, November 20th. The U.S. Labor Department announced that it will not release the October employment report, leading traders to expect that the Federal Reserve is more likely to pause its rate cut at the December policy meeting.
After the U.S. Labor Department confirmed that there was not enough data to release the report, a wave of selling emerged in the federal funds futures market. Traders reduced their expectations of a 25 basis point rate cut at the December 10th meeting. They now expect the Fed to maintain the benchmark interest rate in the range of 3.75% to 4%. The swap market, linked to the Fed's policy rate, is currently pricing in a rate cut of only 6 basis points for the December meeting, with a cumulative rate cut of only 19 basis points by January.
Prior to Wednesday, the swap market was pricing in an 11 basis point cut, equivalent to a fifty-fifty chance of the Fed cutting rates over the next three weeks. Leah Traub, portfolio manager at Lord Abbet, said, "We have long known that there would be no unemployment data for October, but the data for November will not be released until after the Fed meeting, which should be disappointing news for the market. Considering the dissent within the Federal Open Market Committee, this lowers the likelihood of a rate cut." (FX678)
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