Traders view a December cut as increasingly likely amid a stabilizing labor market
Job openings are on the rise across the US with layoffs easing – and investors are becoming increasingly confident that the Federal Reserve is set to cut interest rates again in December as the labor market stabilizes.
Government figures showed Tuesday that available job positions jumped to 7.74 million in October, ending a months-long trend of declines in openings, with trader expectations of a Fed cut on December 18 soaring as a result.
Traders now believe the chance of the central bank cutting rates by 25 basis points in its final rate decision of the year is about 72%, Fed-funds futures showed after the latest economic data release. Last week, traders estimated a 59% prospect of a Fed cut.
October saw layoffs fall to their lowest level since June as a growing number of workers also left their job, suggesting the tightness of the labor market is beginning to ease and Americans are increasingly confident of finding another role.
How are decisionmakers viewing the likelihood of a Fed cut?
San Francisco Fed president Mary Daly, a voting member of the Fed’s Open Market Committee this year, told Fox Business in a Tuesday interview that a December rate cut was “absolutely not off the table” but not a certainty.
“Whether it’ll be in December or sometime later, that’s a question we’ll have a chance to debate and discuss in our next meeting,” she said. “But the point is we have to keep policy moving down to accommodate the economy because we want a durable expansion with low inflation.”
Meanwhile, Federal Reserve Bank of New York president John Williams said rates would probably need to move lower to achieve a neutral policy stance amid that balancing employment outlook, although he refused to be drawn on whether he would back a December cut.
Speaking at a Queens Chamber of Commerce event Monday, Williams said he “expect[s] it will be appropriate to continue to move to a neutral policy setting over time” but emphasized that the path forward was also data dependent.
“If we’ve learned anything over the past five years, it’s that the outlook remains highly uncertain,” he said.
After a series of rate hikes throughout 2022 and 2023, the Fed lowered rates for the first time since the COVID-19 pandemic in September with a bumper 50-basis-point reduction.
It followed through with a more routine quarter-point cut in November – and markets appear increasingly convinced yet another move to bring rates lower is on the way.
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