In September, the Fed had already cut rates by 50 basis points and is now evaluating the optimal rate level after a series of hikes aimed at controlling rising inflation.
A recently released U.S. jobs report further supports the likelihood of a modest rate cut. The report showed fewer jobs were created in October than anticipated, with economic disruptions partly due to severe storms and ongoing labor strikes.
October's non-farm payrolls increased by only 12,000, a significant drop from the revised 223,000 jobs added in September, while economists had predicted an increase of 106,000. Additionally, job growth figures for the previous two months were revised downward, suggesting a gradual slowdown in the labor market.
The U.S. Department of Labor noted that this employment survey was the first conducted since Hurricanes Helene and Milton struck the Southeast, causing substantial regional damage. However, officials did not specify the storms' precise impact on job data.
The unemployment rate remains stable at 4.1%, consistent with the previous month and economists’ expectations. Average hourly earnings saw a 0.4% increase, up from a prior adjusted rate of 0.3%.
Following the 0.5% rate cut in September, the federal funds rate is now within the 4.75% to 5% range. Fed officials have indicated that this assertive rate reduction is aimed at bolstering labor demand amid easing inflation pressures.
According to the CME Group’s (NASDAQ: CME) FedWatch Tool, which tracks market expectations, there is a 99.7% likelihood that the Fed will lower borrowing costs by a quarter point, with an additional 81.5% probability of another similar cut at the December meeting.
