The Fed's December Rate Path Faces a Test as Nonfarm Payrolls Become a Key Variable

Odaily Report: The Federal Reserve last week kept the federal funds rate target range unchanged at 3.75%-4.00%, while acknowledging that inflation remains elevated. The market currently widely expects that the Fed may further raise rates in December.

Investment analyst Michael Kramer believes that if the October employment report is broadly in line with expectations and the unemployment rate does not rise significantly, the market's assessment of the Fed's policy path may not change materially. However, if job growth significantly exceeds forecasts, the unemployment rate declines, and wage growth remains strong at the same time, investors may begin to reassess how many more rate hikes the Fed needs and whether the current market judgment on the end point of the rate hike cycle is sufficient.

MarketWatch statistics show that since January 2025, nonfarm payroll data have exceeded market expectations 11 times and fallen below expectations 10 times, with the average deviation between actual data and forecasts reaching tens of thousands of jobs.