The Federal Reserve’s potential decision to cut interest rates in December remains uncertain as inflation concerns linger in the U.S. economy. Even though the recent government shutdown has passed, now market participants are looking to analyze key economic data, particularly the long-awaited payrolls report for September due out on Thursday.
Futures markets are pricing in about a 1 in 4 chance of a cut next month. The public feels down on the economy. This anxiety is largely a result of the volatile inflationary period that most are still scratching their heads over. Analysts point out that even a disappointing NFP would be unlikely to alter market expectations for a December cut. They’re confident it’s all going to have a limited impact.
“We expect the minutes to confirm that a December move is far from in the bag, particularly given lingering fears over US inflation,” stated an economic analyst at FXStreet. This sense of optimism is shared by several experts who warn to not read too much into one year of new data.
The end of the federal government shutdown has shifted attention back to economic indicators which were recently put on hold. Market participants have been waiting for definitive hints from these official releases, especially Thursday’s payrolls report. As it is, consensus estimates indicate that September job creation might total only 50,000.
“With the government shutdown now over, market participants will finally have some long-awaited official economic data releases to digest, most notably Thursday’s payrolls report for September,” noted an industry expert from FXStreet.
The anticipated new jobs number could read as a sign of labor market softness. As Paul wrote, this doesn’t ensure that the Federal Reserve will reverse course on its tightening of monetary policy. “Consensus is for a 50k job creation number, which while undoubtedly weak, would far from confirm a December rate cut from the Federal Reserve, particularly given recent hawkish rhetoric from FOMC officials,” the expert added.