The economic expansion has advanced from the initial recovery, and the focus is now on metrics the Federal Reserve is looking at to gauge the health of the economy. Since the Fed’s dual mandate is to keep prices stable and maximize employment, we will focus on labor and inflation metrics, keeping in mind the broader economic impact as well. We created a Fed Monitor to track some of the data points that will impact the Fed’s decisions to tighten financial conditions. Additionally, we try to quantify the data and information outside of the dashboard to determine if the Fed is being more dovish than the data, and likely to be more aggressive in the future, or if they are being hawkish relative to the data, and likely to be more conservative in the future.
The Federal Reserve has lowered interest rates by 1.5% since the easing cycle began in September 2024, including two cuts totaling 0.5% at the last two FOMC meetings. Futures markets (as of November 17) now assign a 43% probability to another cut in December, reflecting growing uncertainty. Committee members remain divided, with inflation still running well above the Fed’s 2.0% target. At his late‑October press conference, Chair Powell emphasized that a December cut is “not a foregone conclusion,” dampening expectations.
The government shutdown has complicated the picture by limiting access to official economic data. Trends leading into the shutdown pointed to a slowing labor market alongside renewed inflationary pressures. The Bureau of Labor Statistics did release September CPI, required for the annual Social Security cost‑of‑living adjustment. Both headline and core CPI rose at a 3.6% annualized pace over the past three months, above the 3.0% year‑over‑year increase. While tariffs have contributed to recent price gains, the Fed broadly views this as a one‑time effect likely to fade. Labor market data has been harder to track since the shutdown. Private sources such as ADP reported a 29K decline in job growth in September and a 42K gain in October, while official government data through August showed an average of just 27K jobs added across the prior four reports.
The data blackout has made it more difficult to assess underlying trends, but private providers have helped fill the gap. With inflation elevated and labor market signals mixed, the December decision remains uncertain. We expect the Fed to hold rates steady and are shifting the Fed‑O‑Meter slightly to the right, while anticipating the easing cycle will extend into next year.
