WRAPUP 2-Fed seen cutting rates this month as debate shifts to 2025

Federal Reserve officials appear more likely to cut rates this month after data showed the U.S. labor market remained strong but continued to cool in November, with a deeper debate to come next year over whether to pause further rate reductions.

Federal Reserve officials appear more likely to cut rates this month after data showed the U.S. labor market remained strong but continued to cool in November, with a deeper debate to come next year over whether to pause further rate reductions. U.S. employers added 227,000 jobs last month, a

rebound from a hurricane-impacted slowdown in October, but the unemployment rate ticked back up to 4.2%, the Labor Department's monthly read on the employment situation showed on Friday. Averaged over the last four reports, monthly job gains are now just below 150,000, somewhat short of what many economists feel is needed to provide enough work to match a growing population.

The financial market reaction was decisive, with traders boosting bets on a rate cut at the Fed's Dec. 17-18 policy meeting to 90%, from less than 70% before the report. A quarter point reduction would bring the Fed's policy rate to a 4.25%-4.50% range, a full percentage point below where it was in September when the central bank began cutting rates with expressions of concern that the labor market was deteriorating. Traders now see short-term borrowing costs dropping another 75 basis points next year.

"A 150K or so run rate for payrolls, it's not exactly a wonderful economy, but it's also an economy that doesn't seem to be decelerating as sharply as everyone expected a few months ago," said TD Securities analyst Gennadiy Goldberg. "The Fed can safely deliver another rate cut in December and then maybe communicate a possible pause coming as soon as the January meeting." Earlier this week top Fed officials pointed to the jobs numbers for November as among the chief remaining data points they need to make a decision.

On Monday, Fed Governor Christopher Waller said he was "leaning towards" a rate cut but would reserve final judgment to review the jobs numbers and inflation data due next week. In comments on Wednesday Fed Chair Jerome Powell noted that inflation was running higher than policymakers had expected at this point, and repeated his prior comments that the Fed could be careful in managing the endgame of its roughly three-year fight against inflation.

The caution Powell spoke of, however, may come more into play next year, with many analysts expecting a cut in December but a pause after that. The chair's comments were "well short of challenging the market's growing confidence that a December cut is the base case," wrote Evercore ISI Vice Chair Krishna Guha.

Several policymakers are due on Friday to give their final public remarks before the upcoming meeting. Fed Governor Michelle Bowman, Chicago Fed President Austan Goolsbee, San Francisco Fed President Mary Daly and Cleveland Fed President Beth Hammack are all due to speak or publish remarks through the day.

The Fed's internal communications rules forbid public comments on monetary policy beginning on the Saturday preceding the week before each two-day meeting.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)