Fed's December Rate Call Hangs in Balance Without Official Jobs Data

The Federal Reserve is poised to announce a 25-basis-point rate cut at its October meeting, with traders pricing in a 97.6% probability of the move, bringing the target rate down to 3.75%-4.00% from 4.00%-4.25% currently, according to a Yahoo market preview. However, the path to a December cut remains uncertain, as delayed labor market data from the government shutdown forces policymakers to rely on private indicators like ADP and ISM reports, per a Barron's preview. Bank of America analysts note that while an October cut is "a done deal," a December reduction hinges on whether the labor market "is at best holding steady and at worst slightly deteriorating," as highlighted in the Yahoo market preview.

President Trump has intensified pressure on the Fed, criticizing Chair Jerome Powell for "slow" rate cuts and vowing to block future hikes. Speaking at the APEC summit, Trump quipped, "We will not let the Fed raise interest rates because they are worried about inflation three years from now," a remark that injected volatility into markets, according to a LookonChain post. His comments align with a broader push for accommodative policy, even as new tariffs risk dampening growth. Trump predicted 4% GDP growth in Q1 2026—a forecast exceeding most economist expectations—and argued that tariffs will not hinder economic expansion, as covered in CoinEdition coverage.

Meanwhile, the crypto market has surged in anticipation of the Fed's dovish stance. Bitcoin investment products drew $931 million in inflows last week, with leveraged positions hitting $37.63 billion as traders bet on a rate cut, according to an UnchainedCrypto report. Analysts at CoinShares attribute the rally to easing inflation concerns and the likelihood of quantitative tightening (QT) ending by year-end, as noted in a Coinotag report. The U.S. dollar's weakness, meanwhile, has bolstered risk assets, with GBP/USD sliding to 1.3250 as traders priced in a 68% chance of a Bank of England rate cut in December, per an FXStreet report.

The Fed's October decision will also test its data dependency amid the shutdown. With key employment reports delayed, the central bank must rely on private data showing a fragile labor market. Bankrate's Stephen Kates argued the recent soft CPI print—a 3% annual core rate—"should offer a confidence boost" for additional cuts, a point also noted in the Yahoo market preview. However, DWS economist Christian Scherrmann warned that the absence of official data could make the December meeting "less certain," as central bankers remain "data-dependent, but this time without the data," according to a Bond Buyer piece.

The post-meeting press conference will be critical, with Powell expected to emphasize "downside risks to employment" and "elevated inflation," as referenced in the Barron's preview. Wells Fargo analysts suggested the Fed might end QT in December, though some predict a surprise termination in October, per the Bond Buyer piece. For now, markets are pricing in a full percentage point rate cut by mid-2026, with Bitcoin and other cryptos likely to remain sensitive to policy signals, as discussed in the UnchainedCrypto report.