When is it in December and what to expect

The Federal Reserve’s policy committee meets on December 9-10, and officials are expected to cut the central bank’s key interest rate to lower borrowing costs in an attempt to stabilize the deteriorating labor market.

What to expect from the December meeting

The Federal Open Market Committee is scheduled to meet to consider lowering the federal funds rate from its current range of 3.75% to 4%. The Fed cut interest rates by a quarter of a percentage point at each of its previous two meetings in an attempt to prevent the recent slowdown in the labor market from turning into a dangerous increase in unemployment.

As of Monday, financial markets were anticipating a 63% chance of a rate cut following data showing employers ramped up layoffs in October, and the public has become more pessimistic about the labor market, according to CME Group’s FedWatch tool, which forecasts interest rate movements based on federal funds futures trading data.

However, the interest rate cut is not a done deal. Speaking at a news conference following the Federal Open Market Committee’s latest meeting last month, Fed Chairman Jerome Powell said the central bank is not guaranteed to cut interest rates, and pointed to the 12-member panel having split votes on interest rate changes on whether to cut interest rates to sustain the labor market, or keep them high longer to combat inflation.

The Fed’s data blackout complicates its decision

The government shutdown that began on October 1 makes the Fed’s decision more difficult because it led to the closure of government statistical agencies. In the absence of conclusive information about inflation and the labor market, Fed officials have little to say when deciding whether inflation or the labor market is the more pressing problem to solve.

Monthly reports for September and October from the Bureau of Labor Statistics and other agencies have been postponed. The longer the shutdown lasts, the less chance the Fed will see any data at all before its December meeting. Meanwhile, Fed officials have relied on data from private sources that economists generally consider less reliable than the “gold standard” reports issued by the Bureau of Labor Statistics.

How are employment and inflation?

The Fed faces challenges on both sides of its dual mandate.

Recent indicators show that the labor market is slowing. Private sector employers laid off more people in October than in any October in more than 20 years, according to consulting firm Challenger, Gray & Christmas. The latest labor market report from the Bureau of Labor Statistics showed that the US economy added just 22,000 jobs in August, a significant slowdown from last year’s six-figure job gains.

Meanwhile, inflation has run hotter than the Fed’s target of 2% annual rate, and private price data suggests it is still heading in the wrong direction.

The tariffs have pushed up prices and created uncertainty among business leaders, slowing hiring. Meanwhile, President Donald Trump’s campaign against immigration has slowed job growth, and many companies have announced layoffs and hiring freezes due to the adoption of artificial intelligence.

How does the Federal Reserve work?

The Federal Open Market Committee (FOMC) is the body that sets the federal funds rate for the Federal Reserve System, the central bank of the United States. It holds eight regularly scheduled meetings each year, which are not open to the public. The Fed’s use of interest rates to influence the economy is called monetary policy.

The FOMC consists of 12 voting members: the seven governors of the board, the president of the Federal Reserve Bank of New York, and four other regional bank presidents who serve rotating one-year terms.

At each FOMC meeting, committee members discuss economic and financial conditions and decide whether and by how much to change the federal funds rate. The FOMC will issue a public statement on its decision at 2pm on Wednesday when the meeting concludes. Fed Chairman Jerome Powell usually hosts a press conference afterwards to explain the decision.