Traders work on the floor of the New York Stock Exchange.
(Bloomberg) — Bond traders all but scrapped their bets on a December interest-rate cut after the government canceled the publication of the October employment report, leaving Federal Reserve officials without a key piece of economic data before their final meeting of the year.
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The Bureau of Labor Statistics said Wednesday that some October jobs data would be rolled into a report to be published after the Fed’s December decision. The announcement prompted traders to scale back expectations for a quarter-point reduction, with odds now heavily pointing to policymakers keeping the benchmark rate on hold at the 3.75% to 4% range.
“This lowers the chances of a December rate cut,” Morgan Stanley economists led by Michael Gapen wrote in a note. “An easing labor market is the key argument for a December rate cut.”
Market sentiment had already been shifting toward a greater likelihood of no action at the Dec. 10 meeting, as several Fed officials have urged caution about reducing borrowing costs while inflation remains above the central bank’s 2% target. The updated BLS schedule leaves policymakers — and traders — lacking new evidence of labor market weakness, their justification for rate cuts in September and October.
The announcement sparked a wave of selling in fed funds futures. Swap contracts linked to the Fed policy rate implied an about 30% chance of a cut in December. Before Wednesday, the odds were roughly 50-50. For next year’s first meeting in January, about 21 basis points of easing remained priced in.
Reinforcing the trend, minutes of the Federal Open Market Committee’s Oct. 28-29 meeting released Wednesday showed that “many” Fed officials said it would likely be appropriate to keep interest rates steady for the remainder of 2025.
US Treasury yields edged higher, with rates on two-year notes — which closely reflect changes in monetary-policy expectations — rising about two basis points to 3.59%.
In a statement, the BLS said the federal government shutdown from Oct. 1 to Nov. 12 inhibited collection of the part of the October jobs report that includes the unemployment rate. Other October employment data will be published Dec. 16 with the November report, originally slated for Dec. 5.
“We already knew that there wouldn’t be an October unemployment rate but the news that the November data will not get published until after the Fed meeting should be a disappointment for the market,” said Leah Traub, a portfolio manager at Lord Abbett & Co. “This reduces the probability of a cut given the divided FOMC.”
