The US federal government shutdown canceled the October employment report, a key indicator for interest rate decisions. This has lowered market expectations for a December rate cut to around 30% from 100% a month ago.
According to CME FedWatch, the probability of a December rate cut has fallen to 31.8%, while the probability of leaving rates unchanged is priced in at 68.2%.
According to the FOMC minutes released yesterday, the majority of Fed officials stated at last month’s monetary policy meeting that it would be appropriate to keep the policy rate steady in December.
Although the likelihood of a December interest rate cut is diminishing day by day due to the lack of data, HSBC analysts predicted that the Fed will cut interest rates once again at its December meeting.
However, HSBC analysts presented a negative outlook for 2026 and stated that additional reductions were not expected in 2026.
Analysts also added that the US dollar could bottom out in the first quarter of 2026 or earlier and then recover.
The comments come as investors await the release of key U.S. economic data, which has been delayed by the record-length government shutdown.
*This is not investment advice.