WASHINGTON (TNND) — The last thing the American economy needed was another dose of uncertainty, but that’s exactly what it got this week as traders and economists pulled back expectations that Federal Reserve officials will vote to cut interest rates by another quarter point at their next meeting in December.
The last thing the American economy needed was another dose of uncertainty, but that’s exactly what it got this week as traders and economists pulled back expectations that Federal Reserve officials will vote to cut interest rates by another quarter point at their next meeting in December. (TNND)
A week ago, CME Fedwatch had 2-to-1 odds of a 25-basis-point cut versus keeping rates steady. On Friday, the odds of a cut were less than 50-50.
The Fed is contending with two main obstacles: a dual mandate with almost equal downside risks and a vacuum of economic data caused by the government shutdown.
“Let me set the stage by sharing that I believe that risks to both of the mandated objectives make this one of the most challenging environments to try to do policy since I’ve become a central banker in 2017,” Federal Reserve Bank of Atlanta President Raphael Bostic said this week.
Both Bostic and Boston Fed President Susan Collins said, despite a slowing labor market, they still view inflation as the more urgent risk, based on their current outlook and were hesitant to support another rate cut in December.
“In the three months ending in August, which is the latest available government data, prices rose at an annual rate of almost 3% as measured by the core PCE price index. This increase has been driven by rising goods prices, largely due to tariffs and has more than offset the gradual decline in housing price inflation,” Collins said.
Though the economic impact of tariffs hasn’t been as severe as many expected, both said tariffs are likely to keep inflation elevated into at least early 2026.
They do acknowledge, however, the economic risks behind the recent slowdown in the jobs market.
“Available information suggests that economic activity remains solid. However, the labor market has clearly softened. In particular, hiring has slowed markedly, reflecting slower growth in both labor demand and in labor supply,” Collins said.
Absent the normal cadence of government reports during the shutdown, policymakers had to lean more heavily on private economic data.
As furloughed officials at the Bureau of Labor Statistics and Bureau of Economic Analysis return to work, they are expected to announce updated release dates for data that was supposed to be released during the shutdown.
National Economic Council Director Kevin Hassett said he expects there will be “sort of a half-job report” for October.
The BLS compiles a complete jobs report using two surveys: a payroll survey and a household survey. Former BLS Commissioner Erica Groshen said the former should be easier to recover from than the latter.
“Running two (household) surveys in a month would be a logistical nightmare, as would inserting new untested questions into the survey instrument. And … the quality of information about a week that occurred more than a month ago is highly suspect,” Groshen said.
Friends of BLS, an independent network for those who rely on the bureau’s data, said due to the shutdown, “October 2025 will permanently remain a partial blind spot in America’s official record.”
“BLS entered the 2025 shutdown in a weaker condition, having lost almost 25% of its staff since February,” Friends of BLS said. “One third of BLS leadership positions are vacant, its ability to contract for help is curtailed, and a hiring freeze remains in place. And an unknown number of BLS staff may have decided to leave after the shutdown. With fewer staff available to work, put in overtime, or be reassigned, recovery is likely to be slower.”