The Federal Reserve is widely expected to cut interest rates on Wednesday for the third time in 2025, with market watchers predicting a modest reduction of 0.25%, reports NBC News. The AP notes that such a move would bring the Fed's key rate down to about 3.6%, which would be the lowest in three years or so. However, the central bank is facing an unusual challenge, per NBC: a shortage of fresh government data due to the recent federal shutdown. Key reports, including October's jobs numbers and the consumer price index, were canceled, while the all-important November jobs and inflation figures reports are delayed until mid-December.
In the absence of comprehensive federal data, the Fed is relying on alternative sources, which suggest the labor market is losing steam. The latest report from payroll processor ADP indicated a net loss of 32,000 jobs nationally in November, with small businesses hit especially hard. The most recent government reading on personal consumption expenditures—considered the Fed's preferred inflation gauge—showed a slight uptick to 2.8% in September, but that figure is already months old.
Other indicators, like the Job Openings and Labor Turnover Survey, point to a sluggish job market, with hiring and quit rates at new lows. Meanwhile, ongoing tariffs imposed under President Trump continue to weigh on business sentiment. Wells Fargo CEO Charlie Scharf said tariffs are pressuring hiring and investment, while JPMorgan's Marianne Lake described the economic environment as "a little bit more fragile," noting that while consumers and small businesses remain resilient, their ability to withstand further shocks is diminishing. Reuters notes that investors expect the Fed to hand down at least two more rate cuts by the end of next year, bringing the key rate down to somewhere in the 3.25%-3.5% zone.
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