The Fed's December Rate Cut Expectation Significantly Cooled Down, With No Key Data Available Before the Officials' Meeting

On November 20th. The U.S. Labor Department declared that it will not put out the October employment report. This led traders to anticipate that the Federal Reserve is more prone to pause its rate cut at the December policy meeting. After the U.S. Labor Department verified that there was an insufficient amount of data to release the report, a wave of selling emerged in the federal funds futures market. Traders decreased their expectations of a 25-basis-point rate cut at the December 10th meeting. They currently expect the Fed to maintain the benchmark interest rate within 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, which was equivalent to a fifty-fifty chance of the Fed cutting rates over the next three weeks. Leah Traub, the portfolio manager at Lord Abbet, said, "We have been aware for a long time that there would be no unemployment data for October. However, the data for November will not be released until after the Fed meeting. This should be disappointing news for the market. Considering the dissension within the Federal Open Market Committee, this reduces the likelihood of a rate cut." (FX678)