Fed likely to not cut rates in December following delayed September data, according to market odds
Jerome Powell, chairman of the US Federal Reserve, during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, DC, US, on Wednesday, Oct. 29, 2025.
Al Drago | Bloomberg | Getty Images
Odds of a December rate cut remained low following the release of delayed jobs data.
Markets were last pricing about a 35% chance of a quarter-point cut from the Federal Reserve next month, according to the CME FedWatch Tool. That is higher than the 30% likelihood priced in during the prior session, but remains weak. The tool used fed funds futures trading to calculate the odds.
The target rate is currently at 3.75% to 4.00%.
Those expectations held steady after the release of the September jobs data, the first nonfarm payrolls report investors have seen since the government shutdown. The report gave an uneven picture of the U.S. labor market. The U.S. economy added 119,000 jobs in September, a headline number that blew away expectations for 50,000 jobs added, according to economists polled by Dow Jones.
However, the unemployment rate showed unexpected weakness, rising to 4.4% from 4.3%. The new level is the highest level it’s been since October 2021.
“All those numbers suggest an economy that’s still hanging in there. Not a dramatic move one way or the other,” Former Federal Reserve Vice Chairman Roger Ferguson told CNBC’s “Squawk Box” on Thursday. “People should take note of the slight uptick in the unemployment rate, but labor force participation still looks pretty strong, average hourly earnings certainly looks strong, or strong enough. And so, I don’t think this sort of tilts the cut decision much one way or the other.”
To be sure, some investors are hopeful that weakness in the unemployment rate means a December rate cut remains on the table. The level is closely watched by Fed policymakers, more so than the headline number, and is additionally troubling given that a shrinking labor pool, given the rise in immigration crackdowns, theoretically would keep the job market tight.
“A December cut remains possible given continued labor market softness as expressed by the unemployment rate,” wrote Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management. “Weak hard data and close-to-target inflation look set to drive policy going forward, despite recent hawkish noises.”
“The setup is in place for Powell to continue his risk-management approach to the labor market before his term as Chair expires in May,” Haigh continued.
