Fed Pushback Cools December Cut Bets as Traders Shift Focus to Incoming U.S. Data

Stocks, which had rallied earlier in the week on hopes that the return of economic data would support a dovish Fed, lost momentum as policymakers signaled a preference to wait for clearer evidence before committing to further easing. The shift in tone is already being felt across sectors most sensitive to interest rate expectations  particularly technology, where valuation pressure tends to intensify when the Fed appears hesitant to cut.

Fed Officials Push Back : Market Pricing Adjusts

A growing number of Fed policymakers are signaling discomfort with additional easing at a time when inflation remains above the 2% target and economic activity appears more resilient than expected.

• Chair Jerome Powell reiterated that a cut is “not a foregone conclusion” and emphasized that any decision in December will depend on incoming data.
• St. Louis Fed President Alberto Musalem urged caution, citing persistent inflation pressures.
• Cleveland Fed President Beth Hammack said policy should stay “somewhat restrictive,” signaling reluctance to support further cuts.
• Minneapolis Fed President Neel Kashkari, who opposed the last rate reduction, said he remains undecided on the next move.

With policymakers leaning more balanced than dovish, traders are now split between whether the Fed will hold or cut  a sharp reversal from earlier expectations of a clear easing cycle running into 2026.

Shutdown Over : But Data Gaps Complicate Outlook

President Donald Trump’s signing of the funding bill officially ended the longest government shutdown in U.S. history, paving the way for federal agencies to restart operations. However, the backlog and data gaps created during the 43-day closure mean the upcoming releases may be incomplete.

Key reports, including the October jobs report, will be missing major components such as the unemployment rate, as the household survey was not conducted. For traders, this raises another challenge, a lack of comprehensive data may strengthen the Fed’s argument for staying on hold longer.

Still, markets remain laser focused on the wave of releases expected in the coming weeks not for perfect clarity, but for direction. A softer trend in employment, spending, or inflation could revive expectations for December easing, anything stronger risks solidifying a pause.

Global Policy Setting Turns Less Dovish

The broader market mood is also being shaped by a shift in global monetary policy. Traders are increasingly betting that easing cycles across advanced economies are nearing their end, with central banks prioritizing inflation control over growth support.

Part of this shift stems from unexpectedly resilient economic data worldwide, reducing the urgency for aggressive rate cuts. This has contributed to an uptick in caution across risk assets.

White House Moves on Trade as Election Pressure Builds

Meanwhile, President Trump is preparing tariff cuts and new trade agreements aimed at addressing rising food costs  a key voter concern. While unlikely to shift markets immediately, these policy steps add another layer of uncertainty for traders assessing medium term inflation risks and supply chain dynamics.

Trading Implications : What to Watch Now

1. U.S. Dollar (USD):
Fed hesitation supports a firmer dollar in the near term. Expect volatility around key data releases as traders reassess December probabilities.

2. Gold (XAU):
The metal may face consolidation after recent gains. A clearer dovish pivot from the Fed would be needed to unlock another strong leg higher.

3. Equities (Especially Tech):
The tech sector remains vulnerable as rate-cut odds fade. Positioning should remain defensive until markets digest incoming economic data.

4. Bonds:
Yields may remain range-bound as traders weigh incomplete economic reports against a more cautious Fed stance.

With shutdown optimism now largely priced in, markets have shifted to a data-driven mode. Fed officials are signaling patience, traders are no longer convinced of a December cut, and the next wave of U.S. economic releases will determine whether the market narrative turns risk-on  or risk-off  into year-end.