Traders are scaling back expectations for a Federal Reserve rate cut at the next meeting, with odds now falling below 50%. The probability of a cut at the December 10 meeting has dropped to 47.4%, down from 62.8% a week ago and 96% just a month earlier.
One major reason for the shift is the recent U.S. government shutdown, which severely limited the flow of economic data. This has left Federal Reserve officials operating with less visibility, while inflation remains somewhat elevated.
Susan Collins, a voting member of the Federal Open Market Committee and viewed as a centrist, warned against further easing without clearer evidence. “Without signs of a significant labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation caused by the shutdown,” Collins said on Wednesday.
The Fed cut rates at its past two meetings, lowering the federal funds rate to a range of 3.75% to 4%. Still, Chair Jerome Powell stressed that a December rate cut is “far from a foregone conclusion.”
With about four weeks until the next FOMC meeting and several delayed economic reports now expected, market expectations may shift again. For now, traders remain cautious about the likelihood of a year-end rate cut.
