The Federal Reserve is overwhelmingly expected to cut interest rates on Wednesday for the third time this year, extending an easing cycle that began in September. While prediction markets have all but locked in a reduction of 25 basis points, this month’s vote nevertheless lands in an unusually murky and charged environment.
One culprit? Lingering effects of the U.S. government shutdown, which began in October and lasted through much of November, and which continues to delay key economic reports. Several key data releases were canceled out…
The Federal Reserve is overwhelmingly expected to cut interest rates on Wednesday for the third time this year, extending an easing cycle that began in September. While prediction markets have all but locked in a reduction of 25 basis points, this month’s vote nevertheless lands in an unusually murky and charged environment.
One culprit? Lingering effects of the U.S. government shutdown, which began in October and lasted through much of November, and which continues to delay key economic reports. Several key data releases were canceled outright, including October’s jobs and CPI reports. Some November reports remain delayed as agencies work through the backlog.
As a result, Fed Chair Jerome Powell and his fellow policymakers are meeting with even less clarity and visibility than normal. They’re likely to be stuck relying on private-sector indicators as well as older government readings.
Available data is neither positive nor promising
Privately produced data reports point to a U.S. job market that is slowing down both significantly and relatively steadily, especially for white-collar workers in sectors like tech and consulting.
ADP estimates that private employers shed 32,000 jobs in November, with small businesses cutting a whopping 120,000 positions — the steepest monthly decline in more than two years. Across industries, hiring and quitting rates have also slipped to new cyclical lows. It’s a sign of how cautious and risk-averse both employers and employees have become.
Global bond-market swings complicate the picture
Long-dated government yields have climbed back to levels last seen in 2009, an eye-catching move so close to a possible Fed rate cut. The "bearish" movements suggests investors are reassessing how much more cutting the Fed will deliver, especially as inflation readings, though outdated, remain stuck at elevated levels and governments across the globe race to issue more debt to fund swollen deficits.
In the U.S., 10-year and 30-year Treasury yields have both climbed in recent weeks, reflecting concerns about inflation as well as government dysfunction and uncertainty over who will lead the Fed once Powell’s term ends in the spring.
A tense moment for Powell amid unrelenting Trump pressure
If Powell isn’t feeling the strain, he’s got a stronger constitution than most. It’s rare for Fed chairs to be under such direct — or any — White House pressure. Even so, cutting interest rates too quickly risks reigniting inflation in an environment in which bond investors already appear uneasy. On the other hand, cutting too slowly could mean letting labor-market problems snowball into 2026, and that’s before analysts consider more esoteric risks.
Finally, hanging over it all is President Donald Trump, who describes rate cuts as a chair’s job duty — a pressure campaign that introduces yet another suite of risks and raises questions about the Fed’s independence at a moment when uncertainty is already at high tide.