Fed's Discussion on Lowering Rates: Balancing Job Market Concerns and Inflation Risks Amid Limited Data

Uncertainty has increased regarding whether the Federal Reserve will lower rates in December, as the market

of a 25-basis-point cut as of November 13, a significant drop from 95% just a month before. This change signals due to a shortage of key economic indicators before the Federal Open Market Committee (FOMC) convenes on December 9-10. Christopher Waller, a Federal Reserve Governor known for supporting policy loosening, has pointed to a softening job market and slower economic growth as reasons to cut rates to support employment. However, his view differs from other officials who are still wary about inflation and the economy’s underlying strength.

Waller

, such as fewer jobs being created than expected, a drop in job openings, and more companies planning layoffs, as reasons for easing monetary policy. Data from September and October indicated that businesses added only about 6,500 jobs per month on average, , and job sites like Indeed continued to report fewer new postings. Waller also mentioned that investments in automation and artificial intelligence are making it harder for recent college graduates to find jobs. Despite these issues, Waller the Fed’s 2% goal and that tariffs are not causing ongoing inflationary pressure.

The Fed’s decision is further complicated by limited data.

, set to be released on November 19, will offer the first in-depth look at policymakers’ perspectives, but important figures like the September nonfarm payrolls report— —are still outstanding. The market is now facing a “coin toss” situation, , as investors try to interpret mixed signals from the labor market and inflation data. For instance, pushed Treasury yields lower, while showing a decrease to 3.6% have increased the likelihood of a December rate cut by the Bank of England.

The Fed’s dual mandate is facing new obstacles.

the importance of gathering more data to better understand trends in inflation and unemployment before making policy decisions. At the same time, the central bank has , ending balance sheet reductions as of December 1, a step considered neutral for financial markets. Internationally, India’s central bank is by 25 basis points in December, and the Czech Republic to decrease reliance on fossil fuels.

Investors are also wary of the Fed’s political environment.

of a new Fed chair has sparked worries about the central bank’s independence. that politically motivated rate cuts could weaken the dollar and increase fiscal vulnerabilities. In the commodities sector, as expectations for rate cuts have faded, with gold falling 3.4% over the last four trading days.

The outcome of the Fed’s December meeting will likely

and the delayed September jobs report, both of which could influence market sentiment. While Waller’s case for easing highlights vulnerabilities in the labor market, and missing data point to a decision that could go either way.