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Fed Navigates Uncertainty as Data Gaps Obscure Rate-Cut Decision

Fed Navigates Uncertainty as Data Gaps Obscure Rate-Cut Decision

Bitget-RWA2025/11/21 01:04
By:Bitget-RWA

- U.S. Treasury Secretary Bessent urges Fed to continue rate cuts to support growth amid volatile markets and weak labor data. - Delayed September jobs report and 183% October layoff surge cloud Fed's December decision amid inflation concerns. - Market expectations for a 25-basis-point cut dropped to 42.9% as Fed officials split between hawkish caution and dovish relief calls. - Strong Nvidia earnings temporarily eased AI bubble fears but analysts warn of limited capital budgets amid macro risks. - Global

U.S. Treasury Secretary Scott Bessent has called on the Federal Reserve to stay the course with interest rate reductions, stressing that a looser monetary stance is essential for fostering economic expansion and calming markets during turbulent times. His remarks come as investors contend with mixed signals regarding employment, inflation, and the durability of AI-fueled expenditures,

about the Fed’s December policy decision.

The Fed’s policy outlook has grown more uncertain due to a scarcity of fresh data, especially with the September nonfarm payrolls report delayed until November 20. This release is considered crucial for evaluating the labor market’s strength and will play a key role in the central bank’s deliberations on further rate cuts.

, as employers revealed 153,074 job cuts in October—a 183% surge from the previous month—marking the highest October layoff total since 2003. At the same time, inflation continues to pose challenges, internal discussions about whether a December rate reduction is justified.

Fed Navigates Uncertainty as Data Gaps Obscure Rate-Cut Decision image 0
In recent weeks, expectations for rate cuts have dropped significantly. shows the likelihood of a 25-basis-point reduction in December has decreased to 42.9%, down from 93.7% in October. This change highlights a widening split among Fed policymakers, with some urging caution due to ongoing inflation and others advocating for easing as the labor market cools. that monetary policy remains “restrictive,” while Dallas Fed President Lorie Logan and others have suggested more cuts may be needed to prevent an economic slowdown.

The performance of the AI industry has added another layer of complexity to the Fed’s decision-making.

on November 13, surpassed projections, with revenue hitting $57 billion—$2 billion above estimates—thanks to soaring demand for data center chips. about a potential “AI bubble,” as CEO Jensen Huang dismissed such concerns and emphasized a “positive feedback loop” in AI. Still, analysts warn that even robust earnings may not counteract broader economic headwinds. that “a strong earnings report and higher guidance from Nvidia highlight ongoing worries about limited AI investment budgets.”

Global financial markets have also responded to the prevailing uncertainty.

against other major currencies as hopes for rate cuts have faded, with the AUD/USD pair falling 0.4% on November 17. during periods of monetary easing, hovered near $2,100 but failed to break higher as the Fed’s hawkish stance limited demand. Meanwhile, , signaling reduced growth expectations and a bullish steepening of the yield curve.

Bessent’s push for ongoing rate reductions is in line with broader fiscal objectives, including support for Trump’s $100 billion “One Big Beautiful Bill,” which is designed to stimulate growth through tax cuts and infrastructure investment.

suggests the bill could boost GDP growth by 0.4% in early 2026, though he cautions that high interest rates will limit its overall impact.

As the Fed readies for its December gathering,

—will serve as the last major data release before officials make their decision. A weaker report could revive hopes for a rate cut, while stronger numbers may support holding steady. With the central bank operating with limited data due to the October blackout, , highlighting the fine line the Fed must walk between curbing inflation and sustaining growth.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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