Fresh Data Tilts Markets Into Rate-Cut Camp, But Fed's December Move Not Guaranteed, Macquarie Says

11:46 AM EST, 11/26/2025 (MT Newswires) -- A couple of weak economic reports on Tuesday have helped convince markets that the Federal Reserve will cut rates in December, but strong data over the next two weeks could still pull policymakers back into the no-cut camp, Macquarie said in a note on Wednesday.

The Census Bureau reported Tuesday a rise in retail sales rose that was less than analysts expected in September. Separately, payrolls processing firm ADP (ADP) said private companies lost an average of 13,500 jobs per week over the four weeks ended Nov. 8.

Fed officials seem divided over the central bank's next policy move, but those two data points appear to have turned a majority of Federal Open Market Committee voters toward another rate cut on Dec. 10, Macquarie strategists Thierry Wizman and Gareth Berry wrote in the report.

"We've been skeptical so far of the prospect of a cut, or at least of a 'dovish' tone emitting alongside a cut," Wizman and Berry said. "But a cut is perceivable, insofar as it would not be a large deviation from where the median voter on the FOMC stands."

Markets are pricing in an 83% probability that the Fed will reduce its benchmark rate by a quarter percentage point next month, up from 30% a week ago, according to the CME FedWatch tool.

New York Fed President John Williams said Friday that the central bank can afford to further reduce interest rates to support a weakening labor market.

There's still a flurry of data due between now and the Fed's next meeting that could dictate its eventual decision, according to the Macquarie note.

"The next two weeks could see a swing back toward no cut, if the prevailing data is 'good', instead of bad," Wizman and Berry said.

Initial unemployment claims data, released today, showed a drop of 6,000 in the week ended Nov. 22. These claims "have not been consistent with a deterioration in net hiring condition," the duo wrote ahead of the report's release.

The Fed's Beige Book is expected to be published later on Wednesday, while purchasing managers' index data are due next week. In addition, the Bureau of Economic Analysis plans to release its personal income and outlays report for September on Dec. 5.

"We'd even surmise that the rally we've seen in stocks in the past few days could be a factor that tilts the majority of the FOMC back into a more reserved or 'hawkish' mode during the Fed's quiet period, which begins with the Thanksgiving holiday in the US," Wizman and Berry said. The main US stock measures were up for a fourth straight day on Wednesday. "Ultimately, it may be up to Fed Chair (Jerome) Powell to break the tie on the FOMC."

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