Fed policymakers signal hesitation on December rate cut amid deepening divisions

A growing number of Federal Reserve policymakers are signaling reluctance to push ahead with further rate cuts this year, citing persistent inflation pressures and mixed labor-market data, Reuters reports. The shift comes as short-term futures now price in only a 44.5% chance of another reduction when the Federal Open Market Committee meets on 9-10 December, according to CME FedWatch.

The perceived likelihood that the Fed will cut is down more than 20 chance points from the week starting 7 November, which had pencilled in a 66.9% likelihood. But roll clocks back a month, and the probability of a cut was put at 94.2%.

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REMEMBER- The Fed has already delivered two 25 bps cuts this year in September and October, bringing the target range to 3.75-4.00% as Chair Jerome Powell attempts to steer between showing growth and inflation still running near 3%. Powell noted after the October cut that another move in December was “far from” assured, particularly given the delay in official data releases caused by the US government shutdown.

Boston Fed’s Susan Collins warned she sees a “relatively high bar” for additional easing absent “notable labor-market deterioration.” Minneapolis Fed’s Neel Kashkari said inflation remains “too high,” adding that while some parts of the US economy are performing well, “some sectors of the labor market look like they’re under pressure.”

Many Fed officials have changed their tone quite dramatically in the last few weeks, including San Francisco Fed President Mary Daly, who said that it was “premature” to decide on another move four weeks ahead of the next policy meeting — marking a shift in stance from her vocal support of rate cuts previously.

Complicating matters is the lack of official data to inform their decisions, with the government shutdown having delayed the release of key economic data. But even with the shutdown now over, inflation and jobs data for October will “likely never” be released, White House Press Secretary Karoline Leavitt told reporters on Wednesday. Leavitt characteristically blamed Democrats and said that the absence of data will leave “our policy makers at the Fed flying blind at a critical period.”

THE CLOSING BELL: TADAWUL-

The TASI fell 0.7% on Thursday on turnover of SAR 3.8 bn. The index is down 7.1% YTD.

In the green: Taprco (+10.0%), SPM (+6.0%) and Chemanol (+3.9%).

In the red: Jahez (-4.8%), Senaat (-4.2%) and Tanmiah (-3.7%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.4% on Thursday on turnover of SAR 37.5 mn. The index is down 23% YTD.

In the green: HKC (+9.1%), Alqemam (+8.5%) and Shalfa (+7.7%).

In the red: Alrazi (-5.9%), Riyal (-5.3%) and Multi Business (-4.9%).

CORPORATE ACTIONS-

The Capital Market Authority (CMA) greenlit Emaar, The Economic City’s request to increase its capital by SAR 4.1 bn through debt conversion, according to a Tadawul statement. The plan is still pending approval by the company’s general assembly and completion of regulatory procedures.

REFRESHER- In August, Emaar extended the term of its capital increase agreement with the Public Investment Fund to end on 31 December, instead of 7 September. The agreement allows the company to convert the PIF’s debt into shares, following an amendment in March that raised the conversion amount to SAR 4.1 bn.