If the market doesn’t seem sure whether or not to expect a base interest rate cut next month, it’s not alone—members of the Federal Open Market Committee (FOMC) themselves may have little clue which way the vote is going to go.
In the run-up to this week, the mood was one of disappointment that the FOMC wouldn’t deliver a final cut for 2025, an action many analysts had priced in since this summer. A week ago, investors hedged their bets at a 50/50 likelihood of a 25bps cut from its current position of 3.75% to 4%.
But the tides changed quickly, based on both data and comments from members of the FOMC, and at the time of writing, CME’s FedWatch barometer places an 81% probability of a cut early next month.
A key part of the shift came after comments from the New York Fed’s John Williams, who joined voices like Trump appointee Stephen Miran and Governor Chris Waller in advocating for a cut. This, analysts warned this morning, may need to be taken with a pinch of salt: Members will be asking whether their peers are truly dovish, or are ruffling feathers in order to catch the eye of President Trump and secure a nomination for Fed chairman next year.
Data isn’t making the path much clearer. The first payroll report after the end of the government shutdown painted a pallid picture of the jobs market. Powell called it a “low hire, low fire” environment. The unemployment rate remained relatively stable at 4.4%, and the jobs market added a relatively small 119,000 roles in September.
