EN 
Heading into the Fed’s December meeting next week, the economic backdrop remains foggy. The data that the Fed has on-hand heading into the meeting is stale – and we do not have clarity on the current state of either side of the Fed’s mandate. Our base case forecast one month ago did not assume a December cut from the Fed, given inflation above the Fed’s 2% target and Chair Powell’s comments at the October meeting about proceeding cautiously in a foggy environment. Still, the FOMC will vote based on the data that is available to them at the time of the meeting, and recent data has leaned sufficiently dovish to sway markets and consensus decisively towards a cut. Commentary from the extremely divided Fed has also leaned in this direction. As such, we expect that the Fed will opt not to surprise the market and will opt for the path of least resistance – with a 25-basis point cut – lowering the Fed Funds rate to 3.50-3.75%.
Powell has suggested that rates are moderately restrictive but has also stressed that two-sided risks mean there is no risk-free path. September’s core PCE– at 2.8% y/y – is still above target but is not accelerating to a point that would handcuff the Fed. On the other side of the mandate, the September employment report gave a mixed picture. Despite a upside surprise to nonfarm payrolls, concerns surrounding an uptick in the unemployment rate to 4.4% reflects further weakening in the labor market.
Looking ahead, most of the inflation data for October will not be released, implying that we will not have month-over-month data points available for November, except for a handful of series relying on non-survey sources (likely for gasoline, motor vehicles, airfares, and a few others). And these will not be released until after the December meeting, alongside a combined October and November employment report (which will not include the October unemployment rate).
Aside from the Fed meeting, have a few other data releases landing next week:
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JOLTS data for both September and October will be published on Tuesday. Job postings data from Indeed suggests that job postings likely bottomed out in October and have since turned a corner. Our forecast calls for job openings to tick lower in October (to 7100k from our forecast of 7200k in September).
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We expect to see initial claims rebound +232k the week ending December 6th. This past week was marked by a sizeable downside to jobless claims (+191k), but this is not all that surprising. The week of the Thanksgiving holiday typically results in large swings as claims are less likely to be filed (and processed) during the holiday shortened week.
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We also get lagged trade data from the US Census Bureau. We are forecasting a narrowing of the trade balance to -$58.8b because the pull forward of pre-tariff spending earlier this year. We expect less spending on imports in Q3.
About the Authors
Mike Reid is a Senior U.S. Economist at RBC. He is responsible for generating RBC’s U.S. economic outlook, providing commentary on macro indicators, and producing written analysis around the economic backdrop.
Carrie Freestone is an economist and a member of the macroeconomic analysis group. She is responsible for examining key economic trends including consumer spending, labour markets, GDP, and inflation.
Imri Haggin is an economist at RBC Capital Markets, where he focuses on thematic research. His prior work has centered on consumer credit dynamics and treasury modeling, with an emphasis on leveraging data to understand behavior.
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