With the odds of a December Fed rate cut starting the week at 86% (according to CME FedWatch), the Fed and investors alike probably wish more hard economic data were hitting the tape.
Ten days ahead of the most anticipated Federal Open Market Committee (FOMC) meeting this year, the hawks and doves are doing a bang-up job making their cases for either waiting until late January to lower the federal funds rate again or announcing another rate cut on December 10.
The doves have the momentum. After slashing the federal funds rate by 150bps since September 2024, twice in 2025 so far, Powell & Co. seems likely to lower borrowing costs by another 25bps. Yet with inflation running around 3% y/y, it's hard to see the Fed adding even more liquidity at the January 27-28 FOMC meeting.
In the absence of many shutdown-delayed data series, the personal consumption expenditures deflator (PCED) for September (Fri) may fill in some analytical blanks. So may earnings reports from retailers, including Dollar Tree (Wed) and Kroger (Thu). The same goes for any early clues about spending tallies for Black Friday and Cyber Monday.
Here are some releases with the potential to push the odds of Fed action in December either back toward 50% or closer to 100%:
(1) Inflation indicators. The Fed would surely prefer November stats, but September data on consumption and PCED inflation (Fri) will have to do. The last time Washington released the series, for August, the core PCED rose 2.9% y/y. Core PPI and CPI inflation rates for September suggest that PCED inflation may have moderated slightly. That month's data on import and export prices (Wed) could also offer clues on the state of inflation at the end of Q3.
